Xcentric Ventures LLC v. Borodkin et al

Filing 213

ORDER - IT IS THEREFORE ORDERED THAT: 1. The AEI Plaintiffs' Motions to Dismiss or for Judgment on the Pleadings (Docs. 153 , 156 ) are granted in part and denied in part. 2. Borodkin's Motion for Protective Order (Doc. 155 ) is GRANTED. 3. Borodkin's Motion for Sanctions (Doc. 134 ) is DENIED.4. The AEI Plaintiffs' Anti-SLAPP Motions (Docs. 162 , 195 ) are DENIED. 5. The AEI Plaintiffs' Motions for Sanctions (Docs. 150 , 158 , 205 ) are DENIED. 6. Xcentric' s Motions to Amend (Docs. 177 , 189 ) are DENIED. 7. Xcentric's Motion to Defer Ruling (Doc. 201 ) is DENIED. 8. The AEI Plaintiffs' Motion to Compel (Doc. 202 ) is granted in part and denied in part. Xcentric shall have 30 days from t he date of this Order to respond to the written discovery requests served on it by the AEI Plaintiffs on December 7, 2012, except for those requests to which the Court has sustained Xcentric's objections. Signed by Judge G Murray Snow on 3/20/13. (LAD)

Download PDF
1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Xcentric Ventures, L.L.C., an Arizona limited liability company, No. CV-11-01426-PHX-GMS ORDER Plaintiff, 10 11 vs. 12 Lisa Jean Borodkin, et al., 13 Raymond Mobrez, Counterclaimant, 14 15 vs. 16 Xcentric Ventures, L.L.C.; and Edward Magedson, 17 18 19 20 21 22 23 24 25 26 27 28 Counterdefendants. Pending before the Court are several Motions. Defendants pro se Raymond Mobrez and Iliana Llaneras (“the AEI Plaintiffs”) have filed two “Anti-SLAPP” Motions to Stay or Strike the First Amended Complaint. (Docs. 162, 195.) The Court denies those Motions. The AEI Plaintiffs have also filed a Motion to Dismiss (Doc. 153) and a Motion for Judgment on the Pleadings (Doc. 156). Those Motions are granted in part and denied in part. The Motions for Sanctions brought by the AEI Plaintiffs (Docs. 150, 158, 205) are therefore denied. Defendant Lisa Jean Borodkin has also filed a Motion for Sanctions (Doc. 134), which is denied. In addition, there are several motions relating to discovery. The discovery deadline in this case was December 14, 2012. (Doc. 85.) Borodkin, who was dismissed from this 1 case on November 8, 2012, filed a Motion for Protective Order on November 29, 2012. 2 (Doc. 155.) Plaintiff Xcentric Ventures has filed a Motion to Amend the Scheduling 3 Order, seeking leave to amend its Complaint for a second time. (Docs. 177, 189.) The 4 AEI Plaintiffs have filed a Motion for Summary Judgment (Doc. 184), which Xcentric 5 seeks to defer to take at least some of the discovery Borodkin seeks to quash (Doc. 201). 6 After they filed their Motion for Summary Judgment, the AEI Plaintiffs filed a Motion to 7 Compel Xcentric to respond to their discovery requests. (Doc. 202.) After consideration 8 of these motions and the general posture of this case, the Court declines to amend its 9 scheduling order to allow Xcentric to amend its Complaint for a second time. Borodkin’s 10 Motion to Quash is granted, and Xcentric’s Motion to Defer is denied. The Motion to 11 Compel filed by the AEI Plaintiffs is granted in part and denied in part. The Court will re- 12 open a limited period of discovery to allow the AEI Plaintiffs to obtain discovery from 13 Xcentric. No further discovery will be allowed at this time. The reasoning behind these 14 decisions follows.1 FACTUAL BACKGROUND 15 16 Plaintiff Xcentric Ventures, LLC is an Arizona company that operates the website 17 www.ripoffreport.com (“Ripoff Report”). As its name suggests, Ripoff Report is an 18 online forum where users can read and post messages about businesses that purportedly 19 have “ripped off” consumers in some manner. (Doc. 55 ¶ 2.) Xcentric claims never to 20 have removed a post, which allows its users to post anything about anyone. (Id. ¶¶ 13- 21 17.) Edward Magedson is the manager of Xcentric and the editor of Ripoff Report. (Id. ¶ 22 8.) Defendants Raymond Mobrez and Iliana Llaneras were the principals of Defendant 23 Asia Economic Institute, LLC (“AEI”), a California company that published current news 24 and events online from the year 2000 until June 2009. (Id. ¶¶ 4, 5.) In 2009, several 25 Ripoff Reports appeared on the website that made accusations against the AEI Plaintiffs. 26 1 27 28 The Parties’ various requests for oral argument are denied because they have had an adequate opportunity to discuss the law and evidence, and oral argument will not aid the Court’s decision. See Lake at Las Vegas Investors Group v. Pac. Malibu Dev., 933 F.2d 724, 729 (9th Cir. 1991). -2- 1 (Id. ¶ 20.) 2 I. THE 2010 LAWSUIT 3 On January 27, 2010, the AEI Plaintiffs brought an action against Xcentric in 4 California (the “California Action”). (Id. ¶¶ 27-28.) They were represented initially by 5 Defendant Daniel Blackert, and then subsequently by Borodkin. (Id. ¶¶ 30.) The 6 Complaint asserted twelve claims against Xcentric and Magedson, including RICO 7 racketeering claims predicated on attempted extortion and wire fraud. (Id.) These claims 8 arose out of the AEI Plaintiffs’ allegations that Xcentric provided a forum for others to 9 make defamatory comments and then used its Corporate Advocacy Program (“CAP”) to 10 coerce companies like AEI into paying Xcentric money in exchange for giving them 11 more favorable treatment, such as publishing corrections or modifying placement of 12 negative comments. (Id., Ex. A.)2 The AEI Plaintiffs contended that Xcentric’s general 13 use of CAP, as well as specific comments made to them by Xcentric, provided the 14 predicate act of attempted extortion for a RICO claim. (Id.) 15 The California District Court bifurcated the case to consider the extortion claims3 16 first and ordered the AEI Plaintiffs to produce “a declaration describing meetings with 17 any representative of defendant regarding extortion[ ].” (Id., Ex. B.) In an affidavit, 18 Mobrez reiterated what the AEI Plaintiffs alleged in their complaint: that in the course of 19 several telephone conversations, Magedson told Mobrez that the lawsuits were futile and 20 that it would cost AEI $5,000 and a monthly fee to get the negative comments removed 21 from Ripoff Report. (Id., Ex. C ¶¶ 6-14.) Magedson allegedly told Mobrez that the only 22 way to repair the damage was to enter the CAP program, and that “the more money a 23 company made, the more they would be charged.” (Id.) Llaneras listened in on the 24 25 26 27 2 The Court takes judicial notice of claims made in the initial complaint in the California action because it is a document physically attached to the FAC. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (quoting In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (alteration in original). 3 28 The references to “extortion claims” throughout this Order are references to the RICO claim predicated on attempted extortion. -3- 1 conversations between Mobrez and Magedson and affirmed in her declaration that the 2 conversations occurred as Mobrez described. (Id., Ex. D.) 3 At his deposition, Mobrez reaffirmed the statements about his conversations with 4 Magedson. (Doc. 55 ¶ 39.) Xcentric’s counsel then disclosed to Mobrez and Llaneras that 5 all phone conversations between Magedson and Mobrez had been recorded and that the 6 recording flatly contradicted the statements made in their affidavits that Magedson asked 7 for money in exchange for removing content. (Id. ¶¶ 40-41.) Xcentric claims Magedson 8 never made such comments, and that Mobrez and Llaneras lied in the hopes that they 9 would have the postings about AEI removed. (Id. ¶ 42.) 10 On May 20, 2010, Mobrez and Llaneras filed “corrected” affidavits. (Id. ¶¶ 48-49; 11 id., Exs. F, G.) These affidavits did not describe any telephone conversations where 12 Magedson threatened AEI or asked for money. (Id., Ex. F.) Mobrez, however, maintained 13 that someone at Xcentric told him it would cost “five grand” to join the CAP, and added 14 that he received several calls from Xcentric. (Id. ¶ 5.) He blamed a mix-up between 15 telephone and email conversations for the incorrect statements in his previous 16 declaration. (Id. ¶ 6.) Xcentric asserts that Mobrez continued to lie by asserting that he 17 received calls from Xcentric and that someone told Mobrez it would cost “five grand” to 18 join the CAP. (Doc. 55 ¶ 49.) 19 The AEI Plaintiffs opposed Xcentric’s motion for summary judgment on the 20 extortion claim despite allegedly knowing that the claim “was factually groundless.” (Id. 21 ¶ 52.) On July 19, 2010, the District Court granted Xcentric’s motion for summary 22 judgment as to the RICO extortion claims, and dismissed the RICO wire fraud claims 23 (which had not been pursued to that point) with leave to amend. (Id. ¶ 56.) See Asia Econ. 24 Inst. v. Xcentric Ventures, LLC (“AEI I”), No. CV 10-1360 SVW (PJWx), 2010 WL 25 4977054 at *26 (C.D. Cal. July 19, 2010).4 26 The AEI Plaintiffs then filed a First Amended Complaint (“California FAC”) on 27 4 28 The Court takes judicial notice of the California District Court’s summary judgment decision. -4- 1 July 27, 2010. (Doc. 55 ¶ 57.) The California FAC took a decidedly different approach 2 and asserted claims for wire fraud under RICO, RICO conspiracy, unfair business 3 practices, defamation, intentional and negligent interference with prospective economic 4 advantage, negligent interference with economic relations, deceit, and fraud. (Id.; Doc. 5 103-1, Ex. 8.)5 The California FAC contained complicated allegations about how, among 6 other things, Xcentric caused negative reviews to appear and disappear—depending on 7 whether a company had entered the CAP—when an internet user entered the company’s 8 name into a search engine, and also focused on the alleged discrepancy between how the 9 CAP functions and Xcentric’s statements on its website about never removing content. 10 (Doc. 103-1, Ex. 8 ¶¶ 22-23, 25, 62-68, 138-69.) The California FAC alleged that 11 Xcentric concealed the allegedly exorbitant fees charged for participation in the CAP. (Id. 12 ¶¶ 22-24.) It argued that these actions, taken together, constituted wire fraud and 13 provided the predicate act for a RICO claim. (Id. ¶¶ 22-23, 25, 62-68, 138-69.) 14 Xcentric again moved for summary judgment on September 27, 2010. (Doc. 55 ¶ 15 59.) At some point, the RICO wire fraud claims were dropped or dismissed. Asia Econ. 16 Institute v. Xcentric Ventures, L.L.C., No. CV 10–01360 SVW (PJWx), 2011 WL 17 2469822 at *1 (C.D. Cal. May 4, 2011) (AEI II).6 On May 4, 2011, the District Court 18 granted Xcentric’s motion for summary judgment as to the remaining claims. (Doc. 55 ¶¶ 19 64-65.) 20 II. THE CURRENT ACTION 21 On July 18, 2011, Xcentric filed a Complaint in this Court, bringing claims for 22 malicious prosecution and aiding and abetting tortious conduct against AEI, Borodkin, 23 Mobrez, Llaneras, and Blackert. (Doc. 1.)7 Xcentric amended its Complaint (the “FAC”) 24 25 26 5 The Court takes judicial notice of the claims made in the First Amended Complaint in the California Action referenced in Xcentric’s FAC. 6 27 28 The Court likewise takes judicial notice of the May 4, 2011 decision of the California District Court referenced in Xcentric’s FAC. 7 Default judgment has been entered against Blackert and AEI. (Doc. 126.) -5- 1 on March 16, 2012. (Doc. 55.) On August 30, 2012, Borodkin moved to dismiss 2 Xcentric’s claims asserted against her under Rule 12(b)(6) for failure to state a claim. 3 (Doc. 102.) This Court granted Borodkin’s Motion to Dismiss on November 8, 2012. 4 (Doc. 146) (hereinafter “Borodkin Order”). Borodkin has also filed for sanctions. (Doc. 5 134.) 6 On November 28, 2012, the AEI Plaintiffs also filed a Rule 12(b)(6) Motion to 7 Dismiss for failure to state a claim. Because the AEI Plaintiffs had already filed their 8 answer to Xcentric’s FAC (Doc. 147), they subsequently filed a Rule 12(c) Motion for 9 Judgment on the Pleadings on November 30, 2012, along with a Notice of Errata inviting 10 the Court to disregard the previously filed Motion. (Docs. 156, 159.) The AEI Plaintiffs 11 have also filed a Request for Judicial Notice (Doc. 154), in which they ask this Court to 12 take notice of various documents mentioned in Xcentric’s FAC. Finally, they have filed 13 motions for sanctions. (Docs. 150, 158, 205.) 14 The AEI Plaintiffs also filed so-called “Anti-SLAPP” Motions on December 6, 15 2012, and again on January 31, 2013. (Docs. 162, 201.) They then filed a Motion for 16 Summary Judgment on December 28, 2012. (Doc. 184.) Various discovery issues have 17 also resulted in the filing of Motions. DISCUSSION 18 19 I. THE AEI PLAINTIFFS’ ANTI-SLAPP MOTIONS 20 The AEI Plaintiffs filed two Motions to Strike Xcentric’s FAC under California’s 21 “Anti-SLAPP” statute. See Cal. Civ. Proc. Code § 425.16. That statute provides certain 22 substantive protections when a suit is filed “against a person arising from any act of that 23 person in furtherance of the person's right of petition or free speech under the United 24 States Constitution or the California Constitution in connection with a public issue.” Id. § 25 425.16(b)(1). In such a case, that suit “shall be subject to a special motion to strike, 26 unless the court determines that the plaintiff has established that there is a probability that 27 the plaintiff will prevail on the claim.” Id. The parties agree that a malicious prosecution 28 suit comes under the ambit of the Anti-SLAPP statute. -6- 1 The statute, however, has a timing provision: “The special motion may be filed 2 within 60 days of the service of the complaint or, in the court's discretion, at any later 3 time upon terms it deems proper.” Id. § 425.16(f). Some federal courts have held that the 4 60 day time limit renews upon the filing of an amended complaint. See Globetrotter 5 Software, Inc. v. Elan Computer Group, Inc., 63 F. Supp. 2d 1127, 1129 (N.D. Cal. 6 1999). Xcentric’s FAC was filed on March 16, 2012. The standard time limit for the AEI 7 Plaintiffs to have filed their Anti-SLAPP motions expired on May 15, 2012. Their first 8 Anti-SLAPP motion was filed on December 6, 2012, almost seven months after the 9 statutory deadline. 10 As the Parties recognize, the Court retains discretion to consider the motion 11 outside the 60-day window. The Court declines to exercise it, however. Substantial 12 litigation and discovery took place in the seven months that elapsed from the statutory 13 deadline to the time the motion was filed. The AEI Plaintiffs themselves filed numerous 14 motions, including a Motion to Dismiss, Motion for Sanctions, and a Motion for 15 Judgment on the Pleadings. None of those motions mentioned the Anti-SLAPP statute. 16 The Court recognizes that the AEI Plaintiffs are now proceeding pro se and that their 17 counsel withdrew around the time the window for filing the Anti-SLAPP motion was 18 closing. Some flexibility was in order. Nevertheless, the fact that a litigant is pro se does 19 not give them leave to raise untimely issues at any point in the litigation. Too much time 20 has passed since the AEI Plaintiffs began proceeding pro se and the litigation has entered 21 a more advanced stage. 22 Even if the Court considered the merits of the AEI Plaintiffs’ Motion, it would be 23 denied. Both parties admit that a malicious prosecution action arises from acts in 24 furtherance of the AEI Plaintiffs’ right of petition or free speech. See Zamos v. Stroud, 87 25 P.3d 802, 806 (Cal. 2004). But, as demonstrated by the Court’s ruling on the AEI 26 Plaintiffs’ Motion for Judgment on the Pleadings below, Xcentric has “stated and 27 substantiated a legally sufficient claim”, Jarrow Formulas , Inc. v. LaMarche, 74 P.3d 28 737, 740 n.8 (Cal. 2003), for wrongful initiation of civil proceedings based on the -7- 1 extortion claim. It has therefore carried its burden to show that there “is a probability that 2 the plaintiff will prevail on the claim.” Cal. Civ. Proc. Code § 425.16(b)(1). 3 Consequently, the Court denies the Motions to Strike. 4 II. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 THE AEI PLAINTIFFS’ PLEADINGS A. MOTION FOR JUDGMENT ON THE Legal Standard A motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) “is properly granted when, taking all the allegations in the non-moving party’s pleadings as true, the moving party is entitled to judgment as a matter of law.” Fajardo v. Cnty. of L.A., 179 F.3d 698, 699 (9th Cir. 1998); see Elvig v. Calvin Presbyterian Church, 375 F.3d 951, 955 (9th Cir. 2004) (stating that in ruling on a Rule 12(c) motion, the court must accept as true all allegations in the plaintiff’s complaint and treat as false the allegations in the defendant’s answer that contradict the plaintiff’s allegations). In other words, dismissal pursuant to Rule 12(c) is inappropriate if the facts as pled would entitle the plaintiff to a remedy. Merchants Home Delivery Serv., Inc. v. Hall & Co., 50 F.3d 1486, 1488 (9th Cir. 1995). In considering a motion for judgment on the pleadings, the Court cannot consider evidence outside the pleadings unless the Court treats the motion as a motion for summary judgment pursuant to Federal Rule Civil Procedure 56. Fed. R. Civ. P. 12(c). The Court does not do so here. Nevertheless, the general rule that a court may not consider evidence or documents beyond the pleadings in the context of a Rule 12(c) Motion has two specific exceptions. First, a court may consider documents “whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff’s] pleading.” Knievel, 393 F.3d at 1076 (alteration in original). Second, a court may take judicial notice of “matters of public record outside the pleadings.” Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986), overruled on other grounds by Astoria Fed. Sav. & Loan Ass’n. v. Solimino, 501 U.S. 104 28 -8- 1 (1991).8 While matters of public record, such as prior court proceedings, are proper 2 subjects of judicial notice, the court may take notice only of the authenticity and 3 existence of a particular order or pleading, not the veracity or validity of its contents. Lee 4 v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001); Walker v. Woodford, 454 F. 5 Supp. 2d 1007, 1022 (S.D. Cal. 2006), aff’d in part, 393 F. App’x 513 (9th Cir. 2010). 6 Even when considering a public record, however, judicial notice is limited to those facts 7 that are “not subject to reasonable dispute.” Fed. R. Evid. 201(b). 8 B. Analysis 9 Xcentric asserts two basic claims against the AEI Plaintiffs: (1) malicious 10 prosecution for their initiation and continuation of the California action, and (2) aiding 11 and abetting their attorneys and AEI in their allegedly tortious conduct. 1. 12 Wrongful Initiation and Continuation of Civil Proceedings 13 As this Court previously held, California law applies to Xcentric’s claims against 14 the AEI Plaintiffs. (Doc. 146 at 7.) Under California law, “[m]alicious prosecution is a 15 disfavored action. . . . This is due to the principles that favor open access to the courts for 16 the redress of grievances.” Downey Venture v. LMI Ins. Co., 78 Cal. Rptr. 2d 142, 150 17 (Ct. App. 1998). California law requires the narrow construction of a malicious 18 prosecution claim to ensure that “litigants with potentially valid claims will not be 19 deterred from bringing their claims to court by the prospect of a subsequent malicious 20 prosecution claim.” Sheldon Appel Co. v. Albert & Oliker, 765 P.2d 498, 502 (Cal. 1989). 21 Three elements must be pled in a malicious prosecution claim to survive a motion 22 for judgment on the pleadings: “a plaintiff must demonstrate that the prior action (1) was 23 commenced by or at the direction of the defendant and was pursued to a legal termination 24 in his, plaintiff’s, favor; (2) was brought without probable cause; and (3) was initiated 25 with malice.” Id. at 501 (internal quotations omitted). Liability also lies for continuing to 26 27 28 8 These cases speak to the rule in a 12(b)(6) motion, but the principles are the same in a motion for judgment on the pleadings. See Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981 (9th Cir. 1999). -9- 1 prosecute a lawsuit after one discovers that a properly filed lawsuit now lacks probable 2 cause, although that cause of action typically lies against the attorney. Zamos v. Stroud, 3 87 P.3d 802, 807 (Cal. 2004). It is a claim often pursued in the alternative or against the 4 attorneys. See Antounian v. Louis Vuitton Malletier, 117 Cal. Rptr. 3d 3, 16 (Ct. App. 5 2010); Paiva v. Nichols, 85 Cal. Rptr. 3d 838, 850 (Ct. App. 2008). For all claims, the 6 AEI Plaintiffs argue that Xcentric has failed as a matter of law to allege facts showing 7 that the California Action was initiated or continued without probable cause or with 8 malice. 9 A court must examine the entirety of the cause of action brought by a malicious 10 prosecution defendant because “[a] claim for malicious prosecution may also apply to a 11 defendant who has brought an action charging multiple grounds of liability when some, 12 but not all, of the grounds were asserted without probable cause and with malice.” 13 Sycamore Ridge Apartments, LLC v. Naumann, 69 Cal. Rptr. 3d 561, 572 (Cal. Ct. App. 14 2007). The specific factual allegations contained in Xcentric’s FAC focus on the 15 litigation of the extortion claims by the AEI Plaintiffs. Xcentric’s allegations regarding 16 the other claims are limited to general assertions that those claims were “groundless.” 17 Nevertheless, the AEI Plaintiffs have sought to dismiss the entire FAC and so the Court 18 examines each class of claims brought by the AEI Plaintiffs in the California Action. 19 20 a. Initiation and Continuation of the RICO Extortion Claims 1) Lack of Probable Cause 21 The AEI Plaintiffs first argue that Xcentric has failed to allege sufficient facts to 22 make plausible its claim that the AEI Plaintiffs initiated the California action without 23 probable cause. There are two ways Xcentric can allege that the AEI Plaintiffs lacked 24 sufficient probable cause to justify bringing an action: “A litigant will lack probable 25 cause for his action either if he [1] relies upon facts which he has no reasonable cause to 26 believe to be true, or [2] if he seeks recovery upon a legal theory which is untenable 27 under the facts known to him.” Sangster v. Paetkau, 80 Cal. Rptr. 2d 66, 75 (Cal. Ct. 28 App. 1998). The standard is an objective one and inquiries into the “facts upon which the - 10 - 1 defendant acted in prosecuting the prior case.” Paiva v. Nichols, 85 Cal. Rptr. 3d 838, 2 848 (Cal. Ct. App. 2008) (citing Sheldon Appel, 765 P.2d at 511-12). The existence of 3 probable cause is a question of law for the court to decide. Id.; Sheldon Appel, 765 P.2d 4 at 503. For purposes of a motion for judgment on the pleadings, the Court takes the 5 allegations of the complaint as true and determines whether those allegations would show 6 a lack of probable cause. 7 Xcentric asserts that there is a subjective side to the probable cause inquiry. It cites 8 the California Supreme Court’s statement in Bertero v. National General Corporation, 13 9 Cal.3d 43, 55 (1973), that “if the initiator knows that his claim is groundless he cannot 10 have an actual or honest belief in its validity, and he may not escape liability for 11 commencing an action based on such a claim merely because a reasonable man might 12 have believed it was meritorious.” That portion of the probable cause inquiry is 13 encapsulated in the first method of demonstrating a lack of probable cause: when a 14 litigant “relies upon facts which he has no reasonable cause to believe to be true . . . .” 15 Sangster, 80 Cal. Rptr. 2d at 75. It is a defendant-specific standard that requires 16 examination of that defendant’s knowledge relative to the facts on which he pursued his 17 case. For purposes of this Motion for Judgment on the Pleadings, the Court looks at the 18 claims Xcentric makes in its FAC to determine whether it has alleged sufficient facts to 19 make its claim plausible. 20 The burden to show a lack of probable cause is high, even at this stage, because 21 California law gives a malicious prosecution defendant the benefit of the doubt: “[i]n 22 making its determination whether the prior action was legally tenable, the trial court must 23 construe the allegations of the underlying complaint liberally in a light most favorable to 24 the malicious prosecution defendant.” Sangster, 80 Cal. Rptr. 2d at 75. All the defendant 25 needs is some rational basis for the claims pursued. Accordingly, the defendants’ lack of 26 success in the underlying action is hardly an automatic basis for a malicious prosecution 27 suit. Paiva, 85 Cal. Rptr. 3d at 849. “Probable cause may be present even where a suit [is] 28 merit[less].” Jarrow Formulas, Inc. v. LaMarche, 74 P.3d 737, 743 n.13 (Cal. 2003) - 11 - 1 (internal quotations omitted). 2 The largest portion of the FAC asserts that the AEI Plaintiffs lacked probable 3 cause to initiate the extortion claim because the California Complaint relied upon facts 4 that they “had no reasonable cause to believe to be true.” Sangster, 80 Cal. Rptr. 2d at 75. 5 The initial California Complaint brought by the AEI Plaintiffs highlights conversations 6 between Mobrez and Magedson as prime evidence of Xcentric’s extortion. Mobrez and 7 Llaneras submitted affidavits in May 2010 that attested to the existence and content of 8 those conversations. Those affidavits had been filed in response to the California District 9 Court’s order to file declarations “describing meetings with any representative of 10 defendant regarding extortion[ ]” by May 3, 2010. (Doc. 55 ¶ 30; id., Ex. B.) Xcentric’s 11 FAC alleges that the AEI Plaintiffs revised their May 2010 declarations after learning 12 that Xcentric recorded the telephone conversations between Mobrez and Magedson, and 13 thereby exposed falsity of the factual foundation for the extortion claim. (Id. ¶¶ 39-48.) 14 Xcentric also alleges in its FAC that Mobrez’s and Llaneras’s claim that Magedson 15 demanded “at least five grand” from Mobrez in such conversations “was, and is, 16 completely false.” (Id. ¶ 40.) More specifically, the FAC alleges that the AEI Plaintiffs 17 intentionally misstated the substance of the conversation to create a basis for the RICO 18 extortion claims described by the “Bird Article,” a “How-To” guide for prospective 19 Ripoff Report plaintiffs. (Id. ¶¶ 17-19) 20 Xcentric has sufficiently alleged that the AEI Plaintiffs initiated their extortion 21 claim by relying on facts they had no reasonable cause to believe to be true. Xcentric 22 provides factual allegations in supports of its claims by alleging that Mobrez and 23 Llaneras’s declarations about such conversations were directly contradicted by a 24 recording or recordings that are in Xcentric’s possession. (Id. ¶¶ 40-42.) Xcentric further 25 alleges that the AEI Plaintiffs intentionally fabricated this extortion allegation to create a 26 RICO cause of action that enabled the AEI Plaintiffs to avoid the limitations imposed by 27 the Communications Decency Act (“CDA”), 47 U.S.C. § 230(c)(1). (Doc. 55 ¶¶ 14-19, 28 42.) Mobrez’s and Llaneras did file corrected declarations. Yet, Xcentric alleges that - 12 - 1 Mobrez and Llaneras did so because both “knew that they could not legitimately present 2 [an extortion] theory because at no time was AEI actually extorted by Xcentric or 3 Magedson.” (Doc. 55 ¶¶ 23, 48). 4 Taking as true the allegations that the AEI Plaintiffs knew AEI was never extorted 5 by Magedson and that there is audio evidence of the contradiction between what the AEI 6 Plaintiffs initially alleged in the California Complaint and declarations and what was 7 actually said in those conversations, Xcentric has alleged sufficient facts to plausibly 8 claim that the AEI Plaintiffs lacked probable cause to initiate the extortion claim. The 9 extortion claim in California Complaint relies primarily on the existence of those 10 conversations between Magedson and Mobrez. Again, the fact that Mobrez and Llaneras 11 substantially revised their affidavits in a way that casts serious doubt on the existence of 12 those conversations after being confronted with the recording is sufficient evidence to 13 make plausible Xcentric’s claim that they lacked probable cause to initiate the extortion 14 claim. 15 2) Malice 16 To survive the AEI Plaintiffs’ 12(c) Motion, Xcentric must also set forth sufficient 17 facts to support a finding that the AEI Plaintiffs pursued the extortion claim with malice 18 because, “by itself, the conclusion that probable cause is absent logically tells the trier of 19 fact nothing about the defendant's subjective state of mind. . . . [T]he presence of malice 20 must be established by other, additional evidence.” Estate of Tucker ex rel. Tucker v. 21 Interscope Records, Inc., 515 F.3d 1019, 1031 (9th Cir. 2008) (quoting Downey Venture 22 v. LMI Ins. Co., 78 Cal. Rptr. 2d 142, 152 (Ct. App. 1998)) (emphasis in original). In 23 other words, a malicious prosecution plaintiff’s “bare assertion that [defendants] 24 ‘fabricated’ evidence” does not show malice. Sangster, 80 Cal. Rptr. 2d at 75. 25 Consequently, Xcentric must allege facts demonstrating that the AEI Plaintiffs 26 instituted the suit “primarily for an improper purpose.” Sierra Club Found. v. Graham, 27 85 Cal. Rptr. 2d 726, 739 (Ct. App. 1999). The malice element of a malicious prosecution 28 claim depends on the defendant’s subjective intent in initiating the prior action and is not - 13 - 1 limited to actual hostility toward the plaintiff. Id. (citing Sheldon Appel, 765 P.2d at 503). 2 In their FAC, Xcentric alleges that “the action was commenced wrongfully, maliciously, 3 and for the improper purpose of harassment.” (Doc. 55 ¶ 52.) In all, Xcentric’s FAC 4 enumerates eight “non-legitimate reasons” for initiating the California Action. (Doc. 55 ¶ 5 71.) These include: 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [t]o cause XCENTRIC to divert its resources to defending a frivolous case rather than using those resources to improve the Ripoff Report site; [t]o intimidate XCENTRIC into limiting the public’s ability to use the Ripoff Report website to publish truthful information and access truthful information published by others; [t]o wrongfully investigate Magedson’s personal life and to obtain and publicly release personal, private, confidential, and/or embarrassing information solely for the purpose of embarrassment and harassment. (Id.) Such allegations, taken as true at this stage, are sufficient to allege malice. This claim of improper purpose is bolstered by Xcentric’s allegation that Mobrez and Llaneras devised a plan to induce Magedson to ask for money, thereby “fabricating” a RICO/extortion theory that would allow them to sidestep CDA immunity. (Doc. 55 ¶¶ 23-24, 42.) Consequently, the Court concludes that the FAC alleges sufficient facts to allege that the AEI Plaintiffs lacked probable cause under California law to initiate the RICO/extortion action and that they did so with malice. Xcentric may proceed on its claim for malicious prosecution of the RICO extortion claim. As for Xcentric’s claim that the AEI Plaintiffs wrongfully continued litigating the extortion claim, the substance of the wrongful continuation cause of action is directed at the AEI Plaintiffs’ attorneys, Borodkin and Blackert. (Doc. 55 ¶¶ 74-80.) The allegations against the AEI Plaintiffs in that portion of the FAC are a repeat of those in the wrongful initiation cause of action. When the California Supreme Court first recognized wrongful continuation as a species of malicious prosecution, it did so in a context where an attorney discovered the absence of probable cause after the case had already been filed. Zamos, 87 P.3d at 807. Those are the situations where a wrongful continuation claim lies. - 14 - 1 In any event, it makes no difference in this case. There is no meaningful distinction 2 between wrongful initiation and wrongful continuation as it relates to the AEI Plaintiffs’ 3 extortion claim. Xcentric has alleged facts that support a classic malicious prosecution 4 case—that the AEI Plaintiffs (1) commenced an action based on extortion against 5 Xcentric that was pursued to a legal termination (summary judgment) in Xcentric’s favor, 6 (2) was brought without probable cause; and (3) was initiated with malice. See Sheldon 7 Appel, 765 P.2d at 501. It does not matter, substantively, how that cause of action is 8 phrased. Xcentric states a claim for malicious prosecution based on the extortion claim in 9 the California Complaint. 10 b. RICO Wire Fraud and Unfair Business Practices 11 The next class of claims that the AEI Plaintiffs pursued against Xcentric was for 12 RICO wire fraud and unfair business practices. These claims were litigated by the AEI 13 Plaintiffs in the California action only after the California District Court granted 14 summary judgment on the RICO extortion claim. (Doc. 55, Ex. B; id. ¶¶ 56-57.) The AEI 15 Plaintiffs litigated these claims through their amended Complaint. The AEI Plaintiffs 16 made numerous allegations in the California FAC about the Ripoff Report’s manipulation 17 of HTML coding for members of the CAP and how Ripoff Report’s presentation of that 18 information to the public amounted to fraud. (Doc. 103-1, Ex. 8 ¶¶ 22-23, 25, 62-68, 138- 19 69.) Thus, in their FAC, the AEI Plaintiffs were not relying on any conversations with 20 Magedson. Xcentric therefore cannot rely on those allegations to maintain its claim that 21 the AEI Plaintiffs wrongfully litigated the wire fraud and unfair business practices 22 claims. Thus, unlike the extortion claim, Xcentric’s FAC does not contain any allegations 23 as to why the AEI Plaintiffs lacked probable cause to bring the wire fraud claim. (Doc. 24 103-1, Ex. 8.) Xcentric’s FAC asserts only that the AEI Plaintiffs knew these allegations 25 were “entirely groundless” without alleging any facts about how or why they should have 26 known the factual basis for the claims was false. (Doc. 55 ¶¶ 69, 78.) The arguments the 27 AEI Plaintiffs put forth in favor of dismissal on Xcentric’s claim as it pertains to their 28 wire fraud count are basically those set forth by this Court in dismissing similar claims - 15 - 1 against Borodkin. 2 Thus the only remaining avenue that Xcentric could take to plead a lack of 3 probable cause is to allege that the wire fraud theory was legally untenable. Sangster, 80 4 Cal. Rptr. 2d at 75. As explained more fully in the Borodkin Order (Doc. 146 at 15-16), 5 the AEI Plaintiffs did not lack probable cause to bring the claim because California legal 6 authority justifying the wire fraud theory existed at the time of the California Action. See 7 Leavitt v. Yelp! Inc., Nos. C–10–1321 EMC, C–10–2351 EMC, 2011 WL 5079526 at *9 8 (N.D. Cal. Oct. 26, 2011) (leaving open the possibility that allegations under California’s 9 unfair competition statute would not be immunized under the CDA). 10 In short, largely for the reasons set out in the Borodkin Order (Doc. 146 at 14-16), 11 Xcentric’s FAC fails to sufficiently allege facts that would to support its malicious 12 prosecution claim against the AEI Plaintiffs for their claims of wire fraud and unfair 13 business practices. c. 14 Remaining Claims 15 The same holds true for the remaining claims pressed by the AEI Plaintiffs in the 16 California Action. Xcentric’s FAC makes no allegations specific to the derivative claims 17 of 18 relations, negligent interference with economic relations, deceit, and fraud. (Doc. 103-1, 19 Ex. 8.) The entirety of its FAC is focused on the litigation of the extortion claim, and 20 therefore the Court will dismiss the malicious prosecution claims relating to the 21 derivative claims. defamation, intentional and negligent interference with prospective economic 22 B. Aiding and Abetting Malicious Prosecution 23 Xcentric asserts that the AEI Plaintiffs “provided substantial assistance or 24 encouragement to [the other Defendants] with the intent of promoting their wrongful 25 conduct[,] specifically the malicious commencement and/or continuation of the Asia 26 Litigation.” (Doc. 55 ¶ 88.) Although the Court determined that Xcentric’s FAC fails to 27 state a claim against Borodkin, it entered default judgment against the two other 28 Defendants, AEI and Blackert. (Docs. 50, 86, 90.) The possibility exists that the AEI - 16 - 1 Plaintiffs aided and abetted those two. So Xcentric has a claim against the AEI Plaintiffs 2 for aiding and abetting for the same reasons that it has one for malicious prosecution; 3 namely, that the AEI Plaintiffs lied about their conversations with Magedson and thereby 4 assisted others in perpetuating tortious activity in the California litigation. These actions 5 as alleged constitute aiding and abetting another’s malicious prosecution. 6 Xcentric therefore can pursue its claim against the AEI Plaintiffs for malicious 7 prosecution and aiding and abetting based upon the extortion claim. These are the only 8 claims remaining in this lawsuit. 9 III. THE AEI PLAINTIFFS’ MOTIONS FOR SANCTIONS 10 The AEI Plaintiffs have filed a Motion for Sanctions (Doc. 150) and two Motions 11 for Leave to File Rule 11 Motion for Sanctions (Docs. 155, 205) against Xcentric and its 12 counsel. As the AEI Plaintiffs recognized in their second Motion (Doc. 158), their 13 original Motion for Sanctions was filed in violation of the Court’s Case Management 14 Order (“CMO”) (Doc. 85 at 6) and Rule 11 of the Federal Rules of Civil Procedure. 15 In their first Motion for Leave, the AEI Plaintiffs state that they have “asked 16 Plaintiff’s attorney to withdraw its claims” and “served the motion on Plaintiff Xcentric’s 17 Attorney. . . and wish to wait 21 days before seeking leave to file the motion.” (Doc. 158 18 at 1.) They then filed a second Motion for Leave over two months later. Their attached 19 Motion for Sanctions appears substantively the same as the original Motion for 20 Sanctions. The Court has reviewed the Motion and denies it. The primary thrust of the 21 Motion for Leave is that Xcentric has filed a frivolous complaint against the AEI 22 Plaintiffs. As the discussion above demonstrates, however, Xcentric’s FAC states a claim 23 against the AEI Plaintiffs. Moreover, the remainder of the Motion relates to perceived 24 wrongs that occurred to the AEI Plaintiffs in the California action. As much as the AEI 25 Plaintiffs may feel that they have suffered real harms, those issues are not before this 26 Court. It cannot pass judgment on them and it is a waste of the AEI Plaintiffs’ page limits 27 to rehash those issues. The only question that is relevant is whether the AEI Plaintiffs 28 committed or aided and abetted malicious prosecution by pressing the extortion claim - 17 - 1 against Xcentric. The Motions for Leave are therefore denied. 2 The Court further reminds the AEI Plaintiffs of the need to follow the Federal 3 Rules of Civil Procedure and the Court’s Local Rules, including rules regarding the 4 length and timing of motions, all of which are available on the Court’s website. 5 IV. BORODKIN’S MOTION FOR SANCTIONS 6 The Court has detailed extensively in this Order and prior Orders the litigation that 7 occurred in California between Xcentric and Borodkin’s former clients. Suffice it to say, 8 Xcentric also filed this malicious prosecution action against Borodkin herself. (Doc. 55.) 9 Xcentric alleged that Borodkin engaged in malicious prosecution and aided and abetted 10 her clients’ tortious conduct when she litigated the California action on their behalf. (Id.) 11 The Court granted Borodkin’s Motion to Dismiss Xcentric’s First Amended Complaint 12 on November 8, 2012. (Doc. 146.) Borodkin filed a Motion for Leave to File Motion for 13 Rule 11 Sanctions on September 19, 2012 (Doc. 122), which this Court granted on 14 October 16, 2012 (Doc. 132). 15 A. 16 Rule 11 of the Federal Rules of Civil Procedure provides that 17 21 [t]he signature of an attorney or party [on a legal filing] constitutes a certificate . . . that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. 22 Rule 11 provides that violations of its provisions can result in sanctions, “which may 23 include an order to pay to the other party or parties the amount of the reasonable expenses 24 incurred because of the filing of the pleading, motion, or other paper, including a 25 reasonable attorney's fee.” Fed. R. Civ. P. 11. 18 19 20 Legal Standard 26 “The central purpose of Rule 11 is to deter baseless filings.” Newton v. Thomason, 27 22 F.3d 1455, 1463 (9th Cir. 1994). Rule 11 justifies sanctions “when a filing is 28 frivolous, legally unreasonable, or without factual foundation, or is brought for an - 18 - 1 improper purpose.” Estate of Blue v. Cnty. of L.A., 120 F.3d 982, 985 (9th Cir. 1997). But 2 because the standard governing Rule 11 is objective, “the ‘improper purpose’ inquiry 3 subsumes the ‘frivolousness’ inquiry” when applied to the filing of complaints. Townsend 4 v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990) (en banc). In other 5 words, “complaints are not filed for an improper purpose if they are non-frivolous.” Id. A 6 “frivolous” filing is one that is “both baseless and made without a reasonable and 7 competent inquiry.” Id. Of course, Rule 11 “must be read in light of concerns that it will 8 spawn satellite litigation and chill vigorous advocacy.” Cooter & Gell v. Hartmax Corp., 9 496 U.S. 384, 393 (1990). 10 11 B. Analysis 1. Rule 11 12 Borodkin supports her Motion by claiming that (1) Xcentric’s malicious 13 prosecution and aiding and abetting claims were frivolous, (2) the claims lacked 14 evidentiary support, and (3) Xcentric’s FAC was brought for an improper purpose. This 15 litigation has been protracted and contentious, but Borodkin has not shown that the 16 Complaint violated Rule 11. 17 Xcentric ultimately failed to state a claim for malicious prosecution against 18 Borodkin. (Doc. 146.) After examining each class of claims brought in the California 19 action, the Court determined that Xcentric’s FAC did not state a claim that Borodkin 20 lacked probable cause to prosecute the case on behalf of her clients. Xcentric failed to 21 allege sufficient facts, in light of the documents attached to the Complaint and those of 22 which the Court took judicial notice, that Borodkin either “relie[d] upon facts which [s]he 23 had no reasonable cause to believe to be true, or . . . s[ought] recovery upon a legal theory 24 which [wa]s untenable under the facts known to h[er].” Sangster v. Paetkau, 80 Cal. Rptr. 25 2d 66, 75 (Ct. App. 1998). In short, Xcentric’s FAC failed to allege sufficient facts “to 26 state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 27 U.S. 544, 570 (2007). As the Court noted, the showing necessary to establish probable 28 cause in a malicious prosecution action is quite low and liberal construction was given to - 19 - 1 the claims Borodkin raised in the underlying complaint. See Sheldon Appel, 765 P.2d at 2 502; Sangster, 80 Cal. Rptr. 2d at 75. 3 It is one thing for a complaint to be without merit; it is another for it to be 4 frivolous. Where to draw the line is a difficult question—the Supreme Court has 5 recognized that “[t]he issues involved in determining whether an attorney has violated 6 Rule 11 . . . involve fact-intensive close calls.” Cooter & Gell, 496 U.S. at 404. Borodkin, 7 however, fails to demonstrate how Xcentric’s FAC crossed the line from being non- 8 meritorious to frivolous. She only repeats the same claims made in her Motion to 9 Dismiss, namely the existence of some legal authority that supported her claims in the 10 underlying action and the absence of specificity in the allegations of malice. Those 11 arguments, among others, may have carried the day at the Motion to Dismiss stage, but 12 are insufficient to show that the Complaint was frivolous. 13 Borodkin also claims that Xcentric’s Complaint lacked evidentiary support. 14 “[W]hether a pleading is sanctionable must be based on an assessment of the knowledge 15 that reasonably could have been acquired at the time the pleading was filed.” Townsend, 16 929 F.2d at 1364. Borodkin cites various statements by Xcentric’s counsel and manager 17 that suggest they believed Borodkin was not involved in the potentially perjurious 18 declarations offered by her clients in May 2010. According to Borodkin, these statements 19 reveal that the allegations of her involvement in the Complaint lacked evidentiary 20 support. Her point is not well taken. Isolated statements by counsel some time before a 21 case was filed do not preclude further evidentiary revelations. Furthermore, those 22 comments, in the context they were made, were not avowals of Borodkin’s innocence; 23 instead, they were assumptions made at that time. Finally, as discussed in the Borodkin 24 Order, Xcentric’s malicious prosecution claim did not rest solely on an allegation that the 25 California Action lacked a factual basis. It also attempted to allege that Borodkin pursued 26 an untenable legal theory. Borodkin has not shown that Xcentric’s claims were so lacking 27 in evidentiary support as to warrant sanctions under Rule 11. 28 Finally, Borodkin asserts that Xcentric filed the Complaint for an improper - 20 - 1 purpose. The Ninth Circuit, however, has stated that “subjective evidence of the signor’s 2 purpose is to be disregarded” when a defendant alleges that a complaint was filed for an 3 improper purpose. Townsend, 929 F.2d at 1362 (citing Zaldivar v. City of Los Angeles, 4 780 F.2d 823, 829 (9th Cir. 1989)). The sole question is the frivolousness of the 5 Complaint. Id. Borodkin has not shown that it was. In any event, Borodkin relies solely 6 on an email communication between herself and Xcentric’s counsel that contains an offer 7 of settlement. As Xcentric notes, statements made during the course of a settlement 8 negotiation cannot be offered “to prove liability for or invalidity of [a] claim . . . .” Fed. 9 R. Evid. 408. Furthermore, the statement does not establish an improper purpose. It 10 appears to have been part of a larger two-way settlement dialogue with Borodkin. 11 Consequently, she has not established that the Complaint was filed with an improper 12 purpose. 13 Borodkin’s Motion for Sanctions is denied. Similar to the AEI Plaintiffs, the Court 14 notes that the majority of her Motion is devoted to a rehash of alleged wrongs that 15 occurred in the California action that are not before the Court. Xcentric, in its Response, 16 has asked the Court to award it “the reasonable expenses, including attorney’s fees, 17 incurred” by addressing this Motion. Fed. R. Civ. P. 11(c)(2). The Court declines to do 18 so. 19 2. Order to Show Cause 20 While Borodkin has not succeeded in her Rule 11 motion, she asked this Court in 21 her Reply to show cause why Xcentric and its counsel should not be sanctioned for 22 seeking to amend the Complaint yet again (Doc. 166) to add Borodkin after the Court 23 ordered her dismissed from the case and long after the Case Management Order’s 24 deadline for amendment. 28 U.S.C. § 1927 declares that “[a]ny attorney or other person . 25 . . who so multiplies the proceedings in any case unreasonably and vexatiously may be 26 required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees 27 reasonably incurred because of such conduct.” The Court agrees with Borodkin that 28 Xcentric’s Motion to Amend appears unreasonable and vexatious in light of the Court’s - 21 - 1 prior orders. Nevertheless, Borodkin did not file a response to Xcentric’s Motion to 2 Amend (Doc. 166), and the Court swiftly disposed of it. In addition, Borodkin’s attached 3 spreadsheets of costs and attorneys’ fees do not show any time devoted to responding to 4 Xcentric’s Motion to Amend. (Doc. 170, Exs. A, B.) Therefore, her request is denied. 5 V. DISCOVERY 6 Several issues relating to discovery have arisen both before and after the cutoff of 7 December 14, 2012. (Doc. 85.) A dispute regarding Xcentric’s efforts to take discovery 8 from Borodkin resulted in Borodkin filing a Motion for Protective Order on November 9 29, 2012. (Doc. 155.) Subsequent to the dismissal of Borodkin from the case, Xcentric 10 filed a Motion to Amend the CMO to allow it to file another amended complaint. (Docs. 11 177, 189.) The AEI Plaintiffs filed a Motion for Summary Judgment (Doc. 184), but 12 Xcentric seeks to defer consideration until it can take limited discovery from Borodkin 13 (Doc. 201). The AEI Plaintiffs—after already filing their Motion for Summary 14 Judgment—seek to compel Xcentric to respond to their written discovery requests. The 15 Court will address each issue in turn. 16 A. Motion to Amend CMO 17 Xcentric seeks yet again to amend its Complaint. The Court has denied prior 18 attempts to do so, both as a matter of course and for violating the CMO. Xcentric moves 19 the Court to amend the CMO now to permit amendment and advances a number of 20 arguments about how it is not at fault in the protraction of this litigation. The Court 21 recognizes that some events were out of Xcentric’s hands. Nevertheless, the Court 22 adheres to the CMO unless good cause can be shown, and Xcentric has not shown good 23 cause. It appears the main purpose of its Motion is to try and add detail to its FAC that 24 was previously lacking, after it has already had at least one previous chance to do so. 25 That does not constitute good cause. Xcentric’s Motions to Amend are denied. 26 B. Discovery from Borodkin 27 Before discovery closed on December 14, 2012, Borodkin filed a Motion for 28 Protective Order under Rule 45 of the Federal Rules of Civil Procedure. On November - 22 - 1 26, 2012—after she was dismissed from the case and became a nonparty—Xcentric 2 noticed her deposition and served a subpoena duces tecum on her. The subpoena asked 3 Borodkin to bring the following categories of documents: 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1.) Produce copies of all non-privileged documents, including but not limited to correspondence, in YOUR possession which relate to the Asia Litigation excluding pleadings actually filed with the court, deposition transcripts and exhibits, and documents and correspondence actually provided to or received from Xcentric’s counsel during the course of the Asia Litigation. 2.) Produce copies of all non-privileged documents, including but not limited to correspondence, in YOUR possession which relate to: a. Xcentric Ventures, LLC b. Edward Magedson c. The website www.ripoffreport.com d. The webpage located at: http://www.seomoz.org/blog/theanatomy-of-a-ripoff-report-lawsuit 3.) Produce copies of any correspondence you have sent to or received from any of the following people/entitles from January 1, 2008 to the present which relate to Xcentric, Edward Magedson, the Ripoff Report website, or the Asia Litigation: a. Daniel Blackert b. Sarah Bird, Esq. c. SEOmoz d. John F. Brewington e. Shawn Richeson f. Darren Chaker g. James Rogers h. Kenton Hutcherson i. Christopher Ingle j. Tina Norris k. Jan Martin Smith l. Fadi Karnaby m. Joe Reed n. Melissa A. Herman o. David Russo p. Eric Goldman q. Michael Roberts r. Scott Karosa s. Richard Goddeau 4.) Produce copies of any documents which YOU allege are evidence that RAYMOND MOBREZ, ILIANA LLANERAS, and/or ASIA - 23 - 1 2 3 4 ECONOMIC INSTITUTE, LLC had probable cause to commence the Asia Litigation. 5.) Produce copies of any documents which YOU allege are evidence that RAYMOND MOBREZ, ILIANA LLANERAS, and/or ASIA ECONOMIC INSTITUTE, LLC had probable cause to continue the Asia Litigation. 5 (Doc. 155-3 at 13-14.) Borodkin objects to these requests on a host of grounds. As an 6 initial matter, Requests 4 and 5 are quashed because Borodkin is no longer a party in this 7 matter and therefore does not allege anything regarding the existence or not of probable 8 cause. Xcentric makes no argument to the contrary in its Response. 9 The Court can now evaluate Borodkin’s remaining claims of privilege, burden, 10 and relevancy with regard to the remaining claim in this action: that the AEI Plaintiffs 11 engaged in or aided and abetted malicious prosecution by commencing and continuing to 12 prosecute a claim for extortion against Xcentric. 13 1. Legal Standard 14 Rule 45(c)(1) instructs that “[a] party or attorney responsible for issuing and 15 serving a subpoena must take reasonable steps to avoid imposing undue burden or 16 expense on a person subject to the subpoena. The issuing court must enforce this duty and 17 impose an appropriate sanction—which may include lost earnings and reasonable 18 attorneys’ fees—on a party or attorney who fails to comply.” Rule 45(c)(3)(A) allows a 19 court to quash any subpoena that “requires disclosure of privileged or other protected 20 matter, if no exception or waiver applies” or “subjects a person to an undue burden.” 21 When a person seeks to withhold subpoenaed information under a claim of privilege, she 22 is required to “expressly make the claim” and “describe the nature of the withheld 23 documents, communications, or tangible things in a manner that, without revealing 24 information itself privileged or protected, will enable the parties to assess the claim.” Fed. 25 R. Civ. P. 45(d)(2)(A). 26 27 28 - 24 - 1 2 2. Specific Claims a. Undue Burden 3 The Court first considers Borodkin’s claim that production of the information 4 Xcentric seeks in Requests 2 and 3 is unduly burdensome. She asserts that the Requests 5 are overbroad and largely irrelevant to Xcentric’s remaining claim against the AEI 6 Plaintiffs. “Any information sought by means of a subpoena must be relevant to the 7 claims and defenses in the underlying case. More precisely, the information sought must 8 be ‘reasonably calculated to lead to admissible evidence.’” Gonzales v. Google, Inc., 234 9 F.R.D. 674, 680 (N.D. Cal. 2006) (quoting Fed. R. Evid. 26(b)). Overbroad subpoenas 10 must be quashed or modified because they impose an undue burden on the subpoenaed 11 party. Fed. R. Civ. P. 45(c)(3). 12 Request 2 asks Borodkin to produce all non-privileged documents in her 13 possession that relate to Xcentric, Magedson, and the websites www.ripoffreport.com and 14 http://www.seomoz.org/blog/the-anatomy-of-a-ripoff-report-lawsuit. 15 that this information is largely irrelevant to the claim that the AEI Plaintiffs lacked 16 probable cause and acted with malice in prosecuting the California action. The vast 17 majority of this information is irrelevant to Xcentric’s claim against the AEI Plaintiffs. 18 Only a small subset of this broad category of information is “reasonably calculated to 19 lead to admissible evidence” that the AEI Plaintiffs engaged in malicious prosecution, 20 and that would be any information that the AEI Plaintiffs communicated to Borodkin and 21 her communications back to them about the four subcategories in Request 2. The 22 applicability of any privilege claim is addressed below. Any other information that 23 Borodkin—now a nonparty—has about Xcentric, its manager, its website, and a blog 24 posting is not relevant to Xcentric’s remaining case. Borodkin claims 25 Request 3 lists 19 people, and Xcentric seeks Borodkin’s communications with 26 them dating back to January 1, 2008. This is an overbroad request. Borodkin claims, and 27 Xcentric does not contest, that three of these individuals—Shawn Richeson, John 28 Brewington, and Sarah Bird had no involvement in the California Action. Borodkin’s - 25 - 1 communications with those individuals are therefore irrelevant to Xcentric’s claims 2 against the AEI Plaintiffs. Another four—Joe Reed, Kenton Hutcherson, Jan Smith, and 3 Tina Norris—submitted declarations in the California Action. (Doc. 155-1 ¶ 15.) The 4 Court agrees that, in this specific instance, any non-public communications that Borodkin 5 would have had with these four individuals that would be relevant to this action are 6 covered by the attorney work product doctrine. As to the remaining individuals, Borodkin 7 claims—and Xcentric does not contest—that they are irrelevant to this litigation. The 8 Court therefore quashes Request 3 for being overly broad and unduly burdensome.9 b. 9 Privilege Claims 10 Borodkin claims that much of the information sought by Xcentric is privileged. 11 She raises claims under California’s Reporter’s Shield Law, attorney work product, and 12 attorney-client privilege. 1) 13 Reporter’s Shield Law 14 Borodkin first claims that any correspondence with Eric Goldman, Sarah Bird, and 15 Michael Roberts (in Request 3) is protected under the California Constitution’s 16 Reporter’s Shield Law. That law states that a newsperson “shall not be adjudged in 17 contempt . . . for refusing to disclose the source of any information procured while so 18 connected or employed [as a newsperson] . . . 19 unpublished information obtained or prepared in gathering, receiving or processing of 20 information for communication to the public.” Cal. Evid. Code § 1070(a). Borodkin avers 21 that she is a blogger who writes on her own blog and has written for other websites. (Doc. 22 155-1 ¶¶ 3-4.) She is a member of the Los Angeles press club and has also contributed to 23 web television shows and appeared as a guest lecturer at the University of Southern 24 California. (Id. ¶¶ 5-7.) Xcentric objects to Borodkin’s invocation of the Reporter’s 25 Shield Law and claims that she has not shown that she falls within its protections. or for refusing to disclose any 26 9 27 28 Throughout her Motion, Borodkin accuses Xcentric of using discovery as an opportunity to conduct a wide-range “fishing expedition” into matters related to other litigation. The Court does not express any opinion on that and trusts that this Order will clarify the relevant issues in this case going forward. - 26 - 1 The law lists the individuals who fall within its protection: “a publisher, editor, 2 reporter, or other person connected with or employed upon a newspaper, magazine, or 3 other periodical publication, or by a press association or wire service”; or “a radio or 4 television news reporter or other person connected with or employed by a radio or 5 television station.” Cal. Evid. Code § 1070. Borodkin has stated only that she self- 6 publishes material and collaborates on web video presentations. She has not shown that 7 she “is affiliated with any newspaper, magazine, periodical, book, pamphlet, news 8 service, wire service, news or feature syndicate, broadcast station or network, or cable 9 television system.” Obsidian Fin. Group, LLC v. Cox, No. CV–11–57–HZ, 2011 WL 10 5999334 at *1 (D. Or. Nov. 30, 2011) (interpreting similar Oregon law to not apply to 11 unaffiliated blogger). The statute requires affiliation with such an organization in order to 12 call upon it for protection, presumably to avoid the uncertainty of the law’s application in 13 today’s world of blogs, tumblrs, and tweets, where anyone could claim the mantra of a 14 reporter. Borodkin has not established that she is covered by the Reporter’s Shield law 15 and her claim of privilege thereunder is denied. 16 17 18 19 20 21 22 23 24 25 26 27 28 2) Attorney-Client Privilege, Attorney Work Product, and Undue Burden Borodkin claims that the information sought in the remaining three requests is covered by the attorney-client privilege and attorney work product doctrine. Responding to Xcentric’s requests would therefore create an undue burden because Borodkin would have to produce extensive privilege logs and very little else. The attorney-client privilege protects confidential attorney-client communications, but the privilege belongs to the client and can be waived. See Fed. R. Evid. 502(g)(1); Upjohn Co. v. United States, 449 U.S. 383 (1981). It is the attorney, though, who has standing to assert the work-product privilege. See State Comp. Ins. Fund v. Superior Court, 111 Cal. Rptr. 2d 284, 292 (Ct. App. 2001). California has codified the attorney work product privilege, which creates two tiers of work product. First, “[a] writing that reflects an attorney's impressions, conclusions, opinions, or legal research or theories is not discoverable under any - 27 - 1 circumstances.” Cal. Code Civ. P. § 2018.030(a). Second, “[t]he work product of an 2 attorney, other than a writing described in subdivision (a), is not discoverable unless the 3 court determines that denial of discovery will unfairly prejudice the party seeking 4 discovery in preparing that party's claim or defense or will result in an injustice.” Id.§ 5 2018.030(b). “The protection afforded by the privilege is not limited to writings created 6 by a lawyer in anticipation of a lawsuit. It applies as well to writings prepared by an 7 attorney while acting in a nonlitigation capacity.” Cnty. of Los Angeles v. Superior Court, 8 98 Cal. Rptr. 2d 564, 574. (Ct. App. 2000). In short, both the attorney-client privilege and 9 the work product doctrine provides broad protection when a party seeks discovery from a 10 non-party attorney. 11 At first blush, much of the information requested in Requests 1 and 2 would likely 12 involve communications covered by the attorney-client privilege and attorney work 13 product doctrine. The Requests, however, expressly limit themselves to “any non- 14 privileged information.” Nevertheless, as the briefing of this Motion makes clear, 15 Xcentric admits that while some documents it has requested would normally fall within 16 the attorney-client privilege, the AEI Plaintiffs have waived it. Xcentric has clarified that 17 position by filing a Motion to Defer Summary Judgment under Rule 56(d), in which it 18 claims that the AEI Plaintiffs may intend to raise an advice of counsel defense. While it is 19 not apparent to the Court that it should even address such a demand in light of the fact 20 that the subpoena specifically excludes privileged documents, even were it to 21 countenance such a request, the burden would be upon Xcentric to establish the waiver to 22 the extent it seeks documents that are subject to the attorney-client privilege 23 Advice of counsel can be a valid defense in a malicious prosecution action when 24 the client has fully and truthfully disclosed the relevant facts to her counsel and acted in 25 good faith. See Swat-Frame, Inc. v. Goldstein, 124 Cal. Rptr. 2d 556, 567-68 (Ct. App. 26 2002), disapproved of on other grounds by Reid v. Google, Inc., ___ P.3d ___,___, 113 27 Cal. Rptr. 3d 327 (2011). But its invocation would result in a waiver of the attorney-client 28 privilege as to the communications and documents relating to the advice. State Farm - 28 - 1 Mut. Auto. Ins. Co. v. Superior Court, 279 Cal. Rptr. 116, 119 (Ct. App. 1991). 2 Xcentric has failed to carry its burden of showing a waiver of attorney-client 3 privilege. To this date the AEI Plaintiffs have not affirmatively invoked advice of counsel 4 as a defense in any of their pleadings or motions. Xcentric cites statements by Mobrez 5 and Llaneras that they took certain actions relating to the prosecution of the California 6 suit after consulting with counsel. For example, Xcentric submitted the following 7 Requests for Admission (“RFAs”) to Mobrez: “Admit that YOU were involved in the 8 original decision to commence the Asia Litigation” and “Admit that YOU were involved 9 in the decision to continue pursuing the Asia Litigation.” (Doc. 183 at 7.) Mobrez 10 responded: “Admit that together with the advi[c]e of my Attorney(s) decided to 11 commence the Asia Litigation” and “Admit that together with the advi[c]e of my 12 Attorney(s) decided to continue the Asia Litigation.” (Doc. 183-1, Ex. B.) Xcentric also 13 cites statements from the deposition of Mobrez and Llaneras where they respond to 14 certain questions by citing their lawyers. (Id., Exs. C, D.) But when asked by Xcentric’s 15 counsel whether she would raise advice of counsel as a defense, Llaneras responded “I 16 don’t know.” (Id., Ex. D.) Of course, Xcentric’s remaining claims focus on the wrongful 17 initiation of litigation, and it is not disputed that Borodkin was not counsel to the AEI 18 Plaintiffs at that time. She may have documents related to the AEI Plaintiffs’ actions after 19 April 19, 2010, but, as is indicated, Xcentric has not established that the Asia Plaintiffs 20 are raising a right to counsel defense. 21 In addition, much of the information sought by Xcentric in its remaining three 22 Requests would qualify as work product, as described by Cal. Code Civ. P. § 2018.030. 23 Indeed, there does not appear to be anything in Requests 1 and 2 that would be relevant to 24 Xcentric’s claim that the AEI Plaintiffs committed malicious prosecution by filing an 25 extortion claim, or aided and abetting AEI or Blackert, and yet not covered by the 26 attorney-client privilege or attorney work product doctrine. At least, Xcentric does not 27 describe information that it seeks that meets those criteria. The Court must weigh the 28 burden on Borodkin with the value of any information that could be obtained to Xcentric. - 29 - 1 See Moon v. SCP Pool Corp., 232 F.R.D. 633, 637 (C.D. Cal. 2005). The Court must be 2 sensitive to the burdens on non-parties. See Travelers Indem. Co. v. Metro. Life Ins. Co., 3 228 F.R.D. 111, 113 (D. Conn. 2005). Even if there was such information, requiring 4 Borodkin to create a massive privilege log just so Xcentric can obtain the small slice of 5 information that may be relevant and non-privileged places an undue burden on 6 Borodkin. See Nocal, Inc. v. Sabercat Ventures, Inc., C 04-0240 PJH(JL), 2004 WL 7 3174427 at *3 (N.D. Cal. Nov. 15, 2004) (“In the instant case, the burden of production 8 outweighs the benefits of the subpoena because [the] attorney-client and work product 9 privileges . . . , outweigh the benefits of allowing Plaintiff access to documents which are 10 either already within its possession or irrelevant. Moreover, the categories of documents 11 requested by the subpoena are overly broad and irrelevant because they seek the entire 12 litigation history . . . . Beard believes the search for responsive documents would require 13 hundreds of hours and thousands of dollars to review decades of documents and prepare 14 privilege logs to ultimately produce documents which the Plaintiff already has.”) 15 Because the Court cannot see anything that Xcentric requests in Requests 1 and 2 16 as falling within the category of relevant and also non-privileged, it grants Borodkin’s 17 Motion and quashes the subpoena. Furthermore, because the basis for Xcentric’s Motion 18 to Defer Summary Judgment was its desire to obtain the discovery from Borodkin that 19 the Court just quashed, that Motion is likewise denied. The Court will consider the 20 Response that Xcentric has already filed in deciding the AEI Plaintiffs’ pending Motion 21 for Summary Judgment. Borodkin has asked for sanctions in her motion, and that request 22 is denied. Xcentric did not cross the line into sanctionable conduct with its attempt to 23 obtain discovery from Borodkin. 24 C. AEI Plaintiffs’ Motion to Compel 25 The AEI Plaintiffs filed a Motion to Compel Xcentric to respond to their written 26 discovery requests. Pursuant to the CMO, all written discovery requests were due by 27 October 30, 2012. (Doc. 85 ¶ 4.) The AEI Plaintiffs served their written requests on 28 Xcentric on December 7, 2012, one week before the close of discovery. Xcentric objected - 30 - 1 to the requests on the basis that they were untimely under the CMO. (Doc. 202, Ex. 3.) It 2 also raised a number of objections to certain requests. Xcentric responded to the AEI 3 Plaintiffs’ Motion by citing ¶ 6(a) of the CMO, which directs the parties to arrange an 4 informal telephonic conference with the Court in the event of a discovery dispute. (Doc. 5 85.) Nevertheless, the CMO also states that “[a]bsent extraordinary circumstances, the 6 Court will not entertain fact discovery disputes after the deadline for completion of fact 7 discovery . . . .” (Id. ¶ 6(c).) 8 Xcentric did not behave unreasonably in its response to the AEI Plaintiffs’ written 9 discovery requests. It sought simply to abide by the CMO. Nevertheless, the Court will 10 grant the AEI Plaintiffs’ Motion and require Xcentric to respond within 30 days of this 11 Order to those written discovery requests served on it by the AEI Plaintiffs on December 12 7, 2012. The AEI Plaintiffs may not serve any additional requests. 13 Xcentric objected to several of the requests on substantive grounds. It objected to 14 Request for Production (“RFP”) 2 on the grounds that it covers information subject to the 15 attorney-client privilege and seeks information that is irrelevant. The Court agrees with 16 Xcentric that RFP 2 asks for information that irrelevant to the question of whether the 17 AEI Plaintiffs committed malicious prosecution when they brought and pressed their 18 extortion claim against Xcentric. Xcentric is under no obligation to respond to RFP 2. 19 Xcentric also objects to RFP 5. RFP 5 is very similar to Request 3 that Xcentric 20 served on Borodkin, discussed above. It lists 23 people or entities (including a reference 21 to “Any other parties or entities”) and asks for all of Xcentric’s correspondence with 22 those individuals since January 1, 2008. Blackert and Borodkin were the AEI Plaintiffs’ 23 attorneys in the California Action, and so the request is relevant as to Xcentric’s 24 correspondence with them. The same goes for Joe Reed, Kenton Hutcherson, Jan Smith, 25 and Tina Norris, who submitted declarations in the California Action. Xcentric must 26 respond to RFP 5 for these individuals. As for the others, neither the AEI Plaintiffs here, 27 nor Xcentric earlier, have demonstrated that they had any relevance to the AEI Plaintiffs’ 28 pursuit of the California action. Xcentric need not respond to RFP 5 with regard to the - 31 - 1 remainder. 2 RFPs 7-9 ask for information relating to Xcentric’s probable cause to commence 3 and continue the current litigation. Those requests are irrelevant on the issues remaining 4 in this case, and Xcentric’s objection to them is sustained. 5 RFPs 11-20 ask for detailed financial information, such as tax forms and insurance 6 policies, relating to Xcentric’s operation for over a decade. Mobrez and Llaneras claim 7 that the information is relevant to Xcentric’s claim of damages. (Doc. 55 ¶¶ 72, 90.) 8 Insofar as Xcentric is alleging damages, the Court agrees that certain financial 9 information is relevant. Xcentric therefore must produce the information requested in 10 RFPs 11, 13-17, 19. To the extent Xcentric wishes only to recover legal fees from the 11 California Action, it may enter a stipulation that the only damages it will seek are legal 12 expenses. In that case, it need only provide the legal bills that it seeks to recover. The 13 financial information requested in RFPs 12, 18, and 20 is irrelevant. Nevertheless, the 14 Court agrees with the AEI Plaintiffs that the identities of Xcentric’s employees, partners, 15 and members, and those of its contractors and affiliates are relevant to this case. As the 16 Court understands the AEI Plaintiffs’ case, they argue that someone affiliated with 17 Xcentric made the communication that formed the crux of the extortion claim in the 18 California action. Xcentric therefore must provide the identities requested in RFPs 12-17. 19 RFP 21 does not relate to the claims pursued in this action. 20 Xcentric likewise objects to a number of the RFAs on the grounds of relevance. 21 RFA 1 seeks information relevant to the question of whether the AEI Plaintiffs had 22 probable cause to pursue the extortion claim. Xcentric’s objection is therefore overruled. 23 The Court agrees with Xcentric that RFA 4 seeks information that is irrelevant to the 24 remaining claim. RFAs 6 and 7 ask for information relevant to the AEI Plaintiffs’ theory 25 of extortion and Xcentric’s objection to the contrary is overruled. RFAs 8-11 ask for 26 irrelevant information and Xcentric’s objection is sustained. Given that Xcentric has 27 already denied RFAs 2, 3, 6, 7, and 9, Xcentric needs to respond only to RFAs 1 and 4. 28 Xcentric finally objects to certain interrogatories on the basis of relevance. The - 32 - 1 information sought in Interrogatories 3, 5, 8, 9 and 15 is irrelevant. The Court reminds 2 the AEI Plaintiffs that this is a case against them, not Xcentric, for malicious prosecution. 3 In the event that a dispute arises between the Parties in the course of responding to 4 the remaining written discovery requests, they are instructed to follow the procedure 5 detailed at ¶ 6(a) of the CMO in a timely manner. The Court reminds the AEI Plaintiffs 6 that they have already filed a Motion for Summary Judgment, and the Court will consider 7 only the evidence submitted with that Motion and not any evidence subsequently 8 submitted. CONCLUSION 9 10 The only remaining claim in this case are the claims by Xcentric against the AEI 11 Plaintiffs for malicious prosecution or aiding and abetting tortious conduct arising out of 12 the initiation of the extortion claim in the California action. All remaining claims or 13 parties have been dismissed or had default judgment entered against them. 14 IT IS THEREFORE ORDERED THAT: 15 1. 16 The AEI Plaintiffs’ Motions to Dismiss or for Judgment on the Pleadings (Docs. 153, 156) are granted in part and denied in part. 17 2. Borodkin’s Motion for Protective Order (Doc. 155) is GRANTED. 18 3. Borodkin’s Motion for Sanctions (Doc. 134) is DENIED. 19 4. The AEI Plaintiffs’ Anti-SLAPP Motions (Docs. 162, 195) are DENIED. 20 5. The AEI Plaintiffs’ Motions for Sanctions (Docs. 150, 158, 205) are 21 DENIED. 22 6. Xcentric’s Motions to Amend (Docs. 177, 189) are DENIED. 23 7. Xcentric’s Motion to Defer Ruling (Doc. 201) is DENIED. 24 /// 25 /// 26 /// 27 /// 28 /// - 33 - 1 8. The AEI Plaintiffs’ Motion to Compel (Doc. 202) is granted in part and 2 denied in part. Xcentric shall have 30 days from the date of this Order to respond to the 3 written discovery requests served on it by the AEI Plaintiffs on December 7, 2012, except 4 for those requests to which the Court has sustained Xcentric’s objections. 5 Dated this 20th day of March, 2013. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 34 -

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?