Asia Economic Institute et al v. Xcentric Ventures LLC et al

Filing 173

NOTICE OF MOTION AND MOTION for Leave to Under Rule 56(f) to Take Discovery and Continue Determination of Defendants' SUmmary Judgment Motion filed by Plaintiffs Asia Economic Institute, Iliana Llaneras, Raymond Mobrez. Motion set for hearing on 11/29/2010 at 01:30 PM before Judge Stephen V. Wilson. (Attachments: # 1 Exhibit 1 (Transcript of Sept. 20, 2010), # 2 Exhibit 2 (Def's Discovery Responses to RFD July 22, 2010), # 3 Exhibit 3 (Draft Powerpoint for Verified Safe and CAP Program), # 4 Exhibit 4 (Sept. 23 2010 emails))(Borodkin, Lisa)

Asia Economic Institute et al v. Xcentric Ventures LLC et al

Doc. 173 Att. 1

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ---

THE HONORABLE STEPHEN V. WILSON, U.S. DISTRICT JUDGE PRESIDING

) ) ) Plaintiffs, ) ) vs. ) ) ) XCENTRIC VENTURES, LLC, et al. ) ) Defendants. ) _______________________________)

ASIA ECONOMIC INSTITUTE, LLC, et al.,

No.

CV 10-1360-SVW

REPORTER'S TRANSCRIPT OF PROCEEDINGS LOS ANGELES, CALIFORNIA MONDAY, SEPTEMBER 20, 2010

_____________________________________________________________ DEBORAH K. GACKLE, CSR, RPR United States Courthouse 312 North Spring Street, Room 402A Los Angeles, California 90012 [phone]

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

Dockets.Justia.com

2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ----JABURG & WILK BY: MARIA CRIMI SPETH 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 602-248-1000 Fax: [phone] Email: [e-mail] LAW OFFICES OF DAVID S. GINGRAS BY: DAVID S. GINGRAS 4072 E. Mountain Vista Drive Phoenix, Arizona 85048 For the Defendants: ASIA ECONOMIC INSTITUTE BY: LISA J. BORODKIN 11766 Wilshire Boulevard, Suite 260 Los Angeles, California 90025 For the Plaintiff: APPEARANCES OF COUNSEL:

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 issue. Ventures. MR. GINGRAS: Good afternoon, Your Honor. Dave THE CLERK: Item 1, CV 2010-136-SVW, Asia Economic LOS ANGELES, CALIFORNIA; MONDAY, SEPTEMBER 20, 2010; 1:40 P.M. -----

Institute, et al. v. Xcentric Ventures, LLC, et al. Counsel, please state your appearance. MS. SPETH: Maria Speth for defendant Xcentric

Gingras on behalf of defendants Xcentric Ventures and Ed Magedson. MS. BORODKIN: Borodkin for plaintiffs. THE COURT: you take the lectern. Let me first ask Ms. Borodkin -- would It appears that the RICO claim is no Good afternoon, Your Honor. Lisa

longer at issue if the court denies the motion for reconsideration because the court did grant partial summary judgment on the extortion predicate act, and then in reviewing the pleadings for the hearing today, the plaintiff, while given leave to amend regarding the other predicate act, wire fraud, has abandoned that claim. So it appears that the RICO claim is no longer at If that be the case, you're seeking to remand the case

to the state court, correct? MS. BORODKIN: Your Honor, we wanted to; however,

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 defendants indicated they believed there's diversity jurisdiction and on that ground, we felt we were not able to make a motion to remand. THE COURT: jurisdiction? But what is the nature of the diversity

In other words, you're a California party is

the defendant a nonCalifornia party? MS. BORODKIN: I understand that defendants contend

that the defendants are domiciliaries of Arizona. THE COURT: I see. And the defendant is Xcentric

Ventures, Bad Business Bureau and Edward Magedson, right? MS. BORODKIN: THE COURT: Correct.

In your view, are they separate

defendants or just parties that are all under one defendant umbrella? MS. BORODKIN: Mr. Magedson is a separate defendant

from Xcentric Ventures, LLC. THE COURT: questions. You can take the lectern. What is Mr. Magedson's domicile? MS. SPETH: Your Honor. THE COURT: MS. SPETH: What about Xcentric Ventures? Xcentric Ventures is an Arizona LLC whose He is a resident of the state of Arizona, Let me ask the defendants a few

only member is a Nevada corporation.

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: MS. SPETH: THE COURT: Bad Business Bureau the same? There is no such entity, Your Honor. All right. Back to you.

So there are a variety of state-based actions that you're alleging other than the RICO claim. Can you just, in a Unfair business

summary way, describe the state-based actions:

practice, intentional and negligent interference with prospective economic advantage. I mean what is the unfair

business practice other than that which you've described in your RICO effort? In other words the outline of the case

doesn't change; we're just sort of trying to fit it into different categories. The outline of the case is that the defendant has this site where it posts complaints about businesses, and then it has a program where it engages those businesses who have experienced adverse comments to enter a program that the defendants have whereby the site will include an explanation or positive comments. The defendant, as I understand it, has no control or no legal obligation to filter what is posted. for the moment. Just accept that

If that be the case, how could the defendant

be liable for intentional or negligent interference with prospective business opportunity? MS. BORODKIN: Your Honor, plaintiffs are focused

especially in the amended pleading on conduct of the

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 defendants, not of contributions of third parties. So the

conduct that the amended pleading focuses on falls into a number of categories: One is the defendants' purposeful

encoding of the HTML, which is the computer code that's not visible at first sight on the website but that has the effect of extending certain statements into Google searches primarily. So what we're alleging is that they offer to change what they put in the HTML computer code behind the scenes for a price. We allege that they're not transparent with the general

audience with the website, that people are not aware that that's an option that they offer. THE COURT: of what option? MS. BORODKIN: That they'll offer to change the HTML And -People are not aware

Stop for a minute.

so they can change the Google results. THE COURT: In other words -- I'm sort of translating

this into my own thinking -- that when a complaint is made and it's posted on the defendant website, the software, which enables the complaint to get onto the defendants' software, is somehow manipulated so that the negative comment is more accessible on a Google search than would be otherwise? MS. BORODKIN: Generally, yes.

Our expert has submitted a declaration and report saying most people's point of entry to these reports is not by navigating to their website. They do a Google search for

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 see. somebody's name, they see the preview, which is the small snippet of text. They make a judgment based on that. They may

or may not click through to defendants' website, but the software or computer code that you're referring to is code that defendants write. They offer to change that so that if -They offer to change that to whom? They offer to people who inquire about

THE COURT:

MS. BORODKIN:

the Corporate Advocacy program and to people with whom they've become in legal disputes. THE COURT: Oh, I see. So you're saying that -- I Is that the same

What is the unfair business practice?

thing? MS. BORODKIN: The unfair business practice

derivative of their failure to inform the public that this is the basis on which they will offer to change somebody's Google results. They have basically endorsements. We feel they're

independent violations of the FTC Act where they will verify safe certain advertisers, possibly participants in the Corporate Advocacy Program. It's not based on an independent evaluation as far as we can see, it's based on their membership in the CAP program, and the implication is damaging to others who are not members of the programs because it implies that they're not verified safe or that they're ripoffs. THE COURT: How do you respond to that?

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. SPETH: Your Honor, there is two issues that One is she has said that there's The issue is very

Ms. Borodkin has raised:

something going on with the HTML code. simple, Your Honor.

If someone posts something on the website

that is automatically -- then there's going to be a title tag that's created as a result of the input of the user, that will allow it to be searched by Google. It's not something that the

website does, it's something that -- first of all, that Google does by searching the website, and secondly that is -THE COURT: That's the point. I mean the plaintiff

contends that what is presented to a Google searcher is not something that the defendant enhances or manipulates, it's just the by-product of the posting by the defendant, and the plaintiff -- at least as I hear it today -- contends that that's not so, that they have some expert who will say that the code is prepared or constructed in a way that enables the Google searcher to contact that negative information more readily than otherwise. MS. SPETH: Neither their complaint nor their expert

says such a thing, Your Honor. THE COURT: But let me -- well, how do you intend to Do you think that they're

address these state law claims? susceptible to summary judgment? MS. SPETH:

Yes, Your Honor, under the Communications

Decency Act and everyone is -- perhaps as to the fraud claims,

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and the fraud claims they lack both reliance and they lack any causation to their damages -THE COURT: Forgetting for the moment the first

amendment type of defense, why would that type of defense necessarily control if what the plaintiff says is true, that you're manipulating the code to emphasize the negative information posted on your website? Wouldn't you have to deal

with that by way of attempting to establish that the code writing argument that the plaintiff is offering has no substance? MS. SPETH: Your Honor, we don't disagree with the

plaintiff's expert and the way the plaintiff's expert -- we disagree with his opinions, but the way he describes the process is accurate; and the process is exactly what Your Honor described in the beginning of your comments. The process is

that there is a template, a software code, and when the user inputs the user's information, that's the information that creates the tagging for the title tag. That's the way plaintiff's expert describes it, that's the way it actually happens, and that is a process by which the user inputs the content not Ripoffreport. And so

under the Communications Decency Act -- and this very issue has been decided by other federal judges, Your Honor -- under the Communications Decency Act, Ripoffreport is only responsible for what they input.

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. merits. THE COURT: MS. SPETH: THE COURT: MS. SPETH: independently. THE COURT: summary judgment? MS. SPETH: We did move for reconsideration on our We already filed it, Your Honor, Well, then, are you going to file the Federal judges are not fungible. I do know that, Your Honor. Some are better than others. I welcome you to look at this issue am? MS. SPETH: I don't think as capable as you, Your THE COURT: Are other federal judges as capable as I

They made these decisions after full briefing on the

motion for summary judgment.

and then we moved for reconsideration on it; and the only reason that Your Honor didn't decide it was because you bifurcated and you wanted to hear the RICO claims first. THE COURT: That is true.

So now you're saying that it was briefed but not addressed. MS. SPETH: Exactly. At this point we've asked the

court to address the remaining claims to -THE COURT: fully briefed? MS. BORODKIN: It is not. It was not on notice. We Have you responded to the -- yes. Is it

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 way. had no meet and confer. Plaintiffs were relying on the court's

statements in the order of July 19th that their motion for summary judgment was inappropriate inasmuch as the case had been bifurcated. THE COURT: Why don't we do it, then, in a cleaner

Why don't you refile a summary judgment motion and do

that by the end of the week, Monday. MR. GINGRAS: Your Honor, if I might, that raises a

question because I'm not sure what complaint we would be addressing. There is a first amended complaint, which is the I think they moved for leave to

current operative pleading.

file a second amended complaint, which has neither been granted nor denied. THE COURT: What would the second amended complaint

contain that the first amended complaint doesn't? MS. BORODKIN: another point? Could I be heard, Your Honor, on

We respectfully disagree with the entire This theory has never been

characterization of the precedent. raised.

No federal court has addressed search engine

optimization practices -THE COURT: You know something? Obviously this is

just an opportunity for the court to get some sort of preview. I have not consider the matter, and certainly I won't until it's briefed. That's why I asked if it was briefed.

Now, if the plaintiffs file a summary judgment motion

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 on the state claims, what is the operative complaint? the first amended complaint or the second amended -MS. BORODKIN: I understand. Today we are here on a Is it

motion under Rule 15 to amend the pleadings to permit the filing of a second amended complaint. The difference between

the second amended complaint is that omits the RICO wire fraud claim. This was done in response to a Rule 11 motion. THE COURT: Why don't we just do this -- I mean all

the skirmishing about the complaint -- I mean you know the complaint is -- no one sees the complaint. see the complaint. The jury doesn't

So why don't we just agree to strike the

RICO claim from the first amended complaint and let that stand? MS. BORODKIN: With respect to our motion to amend

the pleadings, plaintiffs have wanted to do that, and we would be amenable to that; however, we did file the motion for reconsideration on the extortion claim. THE COURT: Let me make it simple: The motion for

reconsideration is denied.

The motion to strike the RICO claim That is the

from the first amended complaint is granted. operative complaint.

So then file your summary judgment motion with that as the pleading, and file it by next Monday. And then set up the schedule, Paul. THE CLERK: Yes, Your Honor.

Filing of the motion will be September 27th; the

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 opposition will be due October 4th, the reply will be due October 12th, hearing will be November 1st at 1:30. THE COURT: are on the agenda. Now, there are some other matters that

Apparently the defendants believe that the

plaintiff breached a confidentiality agreement by describing the nature of the settlement talks, but while a breach of the confidentiality attached to settlement talks is serious and an ethical matter, the plaintiff, perhaps mistakenly, but arguably, raises the matter as sort of a similar conduct kind of argument; isn't that true? MS. BORODKIN: THE COURT: In other words, you're saying --

Yes, we were threatened.

You view that as a threat. It was a threat.

MS. BORODKIN: THE COURT:

Not as a settlement discussion.

And, frankly, in this context, it's not worth the court's while to parse that out. flags, all right? No penalty. Thank you, Your Honor. So let's just pick up all the

MS. BORODKIN: THE COURT:

Thank you.

We'll see you on the appointed date. MS. BORODKIN: THE COURT: We have a hearing on October 4th.

Yes, thank you.

(Proceedings concluded at 1:55 p.m.) -----

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

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CERTIFICATE

I hereby certify that the foregoing is a true and correct transcript from the stenographic record of the proceedings in the foregoing matter.

September 23, 2010 __________________________ Deborah K. Gackle Official Court Reporter CSR No. 7106 __________________________ Date

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE