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

Filing 94

ORDER GRANTING IN PART DEFENDANTS MOTION FOR SUMMARY JUDGMENT AS TO THE RICO CLAIMS TO THE EXTENT THOSE CLAIMS ARE BASED ON PREDICATE ACTS OF EXTORTION 40 ; DENYING PLAINTIFFS' EX PARTE APPLICATION FOR A CONTINUANCE OF THE SUMMARY JUDGMENT MOTION UNDER RULE 56(f) 87 ; GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' COMPLAINT AS TO THE RICO CLAIMS BASED ON PREDICATE ACTS OF WIRE FRAUD; AND GRANTING PLAINTIFFS' MOTION FOR A BENCH TRIAL 50 by Judge Stephen V. Wilson. See Attached Order. (rs)

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Asia Economic Institute et al v. Xcentric Ventures LLC et al Doc. 94 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 26 27 28 I. INTRODUCTION AND PROCEDURAL BACKGROUND Plaintiffs Asia Economic Institute, LLC ("AEI") and its principals, Raymond Mobrez and Iliana Llaneras (collectively, "Plaintiffs" or "AEI") brought this action on January 27, 2010. The v. XCENTRIC VENTURES, LLC, an Arizona limited liability company, d/b/a/ as BADBUSINESS BUREAU and/or BADBUSINESSBUREAU.COM, and/or RIP OFF REPORT and/or RIPOFF REPORT.COM; BAD BUSINESS BUREAU, LLC, organized and existing under the laws of St. Kitts/Nevis, West Indies; EDWARD MAGEDSON, an individual, and DOES 1 through 100, inclusive, Defendants. ASIA ECONOMIC INSTITUTE, a California limited liability company, RAYMOND MOBREZ, an individual, and ILIANA LLANERAS, an individual, Plaintiffs, ) ) ) ) ) ) ) ) ) ) CV 10-1360 SVW (PJWx) UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ORDER GRANTING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AS TO THE RICO CLAIMS TO THE EXTENT THOSE CLAIMS ARE BASED ON PREDICATE ACTS OF EXTORTION [40]; DENYING PLAINTIFFS' EX PARTE APPLICATION FOR A CONTINUANCE OF THE SUMMARY JUDGMENT MOTION UNDER RULE 56(f) [87]; GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' COMPLAINT AS TO THE RICO CLAIMS BASED ON PREDICATE ACTS OF WIRE FRAUD; AND GRANTING PLAINTIFFS' MOTION FOR A BENCH TRIAL [50] Dockets.Justia.com 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 26 27 28 case was removed to this Court in February 2010 on the grounds of both federal question and diversity jurisdiction. Plaintiffs generally allege that Defendants Xcentric Ventures, LLC ("Xcentric"), Bad Business Bureau, LLC, and Edward Magedson (collectively "Defendants") own and operate a website at www.RipoffReport.com ("Ripoff Report") and that defamatory comments regarding AEI and its principals were posted on the website. Plaintiffs assert several claims against Defendants arising out of these allegedly defamatory posts (and Defendants' conduct related thereto) including defamation, unfair business practices, intentional and negligent interference with prospective economic advantage, and violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). On April 19, 2010, the Court held an initial case status conference at which both parties appeared and were represented by counsel. The Court instructed the parties that it was bifurcating Plaintiffs' third and fourth causes of action under the RICO statute, 18 U.S.C. 1962(c), and 1962(d), to the extent that those claims are based on the predicate acts of extortion, and ruled that those claims would be tried first. The Court set a trial date for August 3, 2010. The Court also ruled that the issue of damages would be bifurcated; thus, the August 3, 2010 trial would only address Defendants' liability under the RICO statute. Consistent with this ruling, Plaintiffs made a motion before Magistrate Judge Walsh to bifurcate discovery so as to limit discovery prior to August 3, 2010 to the RICO/extortion claims only. Magistrate Judge Walsh granted the motion on June 24, 2010. (Order, Docket No. 82.) 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 26 27 28 On May 24, 2010, Defendants filed a Motion for Summary Judgment as to Plaintiffs' entire case. Plaintiffs opposed the motion and also filed an ex parte application for a continuance of the summary judgment motion so as to conduct further discovery under Federal Rule of Civil Procedure 56(f). On May 31, 2010, Plaintiffs filed a Motion to Enforce Defendants' Waiver of a Jury Trial and for a Bench Trial. oppose the motion. The motions came before the Court for a hearing on July 12, 2010. Additionally, at the July 12, 2010 hearing, the Court raised the issue of whether the Plaintiffs' Complaint was sufficient to state a plausible claim for RICO violations based on the alleged predicate acts of wire fraud. Defendants' argued that the Complaint was not Defendants did not sufficient, and made an oral motion to dismiss those claims for failure to plead the alleged acts of wire fraud with particularity. Having read and considered the parties' briefing, the evidence submitted therewith, and the parties' oral arguments, and for the reasons stated below, Plaintiffs' Ex Parte Request for a Continuance of the Motion for Summary Judgment under Rule 56(f) is DENIED. Defendants' Motion for Summary Judgment is GRANTED IN PART as to the third and fourth causes of action under RICO, to the extent those claims are based on the alleged predicate acts of extortion or attempted extortion. Defendants' Motion to Dismiss Plaintiffs' third and fourth causes of action under RICO, to the extent those claims are based on alleged acts of wire fraud, is GRANTED WITH LEAVE TO AMEND. Plaintiffs' Motion for a Bench Trial is GRANTED. 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 26 27 28 II. FACTUAL BACKGROUND The following material facts are undisputed unless otherwise noted. As the Court has bifurcated this case so as to first resolve only the issue of whether Defendants are liable under the RICO statute based on predicate acts of extortion, the Court has not considered Defendants' arguments regarding Plaintiffs' state law claims or regarding Plaintiffs' alleged damages (or lack thereof). The Court will only address facts that are relevant to the RICO/extortion1 claims. A. Asia Economic Institute ("AEI") Plaintiff Asia Economic Institute ("AEI") was formed sometime in 2000 and conducted business in California for nine years. Statement of Undisputed Facts [hereinafter "DSUF"] 4-5.) (Defs. AEI is owned and operated by its principals, Plaintiffs Raymond Mobrez and his wife Iliana Llaneras. (DSUF 3.) The company operated as a free, on-line, (Declaration non-governmental publication of current news and events. of Raymond Mobrez, dated May 3, 2010, 2.) At the times relevant to this lawsuit, AEI was planning to produce seminars and conferences, and was considering selling memberships to some of those programs. (Plaintiffs' Statement of Genuine Issues [hereinafter "PSGI"] 6, 8.) However, AEI never actually produced any seminars. (DSUF 8.) During its nine years in operation, AEI's total revenues were $0 and its profits were $0. 2009. (DSUF 10.) (DSUF 9.) AEI ceased all business operations in June B. 1 Xcentric and www.RipoffReport.com When the Court refers to the "RICO/extortion" claims, the Court is referring to Plaintiffs' third and fourth causes of action under the RICO statute, to the extent that those alleged violations are based on the alleged predicate acts of extortion or attempted extortion. 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 26 27 28 Defendant Xcentric Ventures, LLC ("Xcentric") operates the website www.RipoffReport.com ("Ripoff Report"), which started in 1998. 1-2.) (DSUF Defendant Edward Magedson ("Magedson") is the founder and (DSUF 2.) The manager of Xcentric and the "ED"itor of the website. website is a consumer reporting website where third party consumers can document complaints about companies or individuals. (PSGI 1.) Magedson contends that the Ripoff Report is the leading complaint reporting website on the Internet. 2010, 2.) (Magedson Decl., dated May 24, The posting service is free to use the Ripoff Report does not charge anything to users who create reports, viewers who read reports, or persons who post comments or rebuttals to the reports. (Id. 4.) If an author wants to submit a report on the Ripoff Report website, they must first create a free user account. 4.) (Smith Decl. The user is required to provide their name, address, phone number, (Id.) The user and other information, all of which may be falsified. is then required to provide an email address, which the server automatically confirms by sending an email to that address prior to allowing the user to post anything. (Id.) To draft a report, users In Step 1, the user are guided through a five step process. (PSGI 3.) must input certain information about the company they are reporting, including the name, address, and phone number. (PSGI 4.) In Step 2, the user is asked to create a "report title" by filing out a series of four blank boxes into which the user can enter (a) the company name; (b) words explaining what the report is about; (c) the city where the company is located, and (d) the state where the company is located. 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 26 27 28 (Smith Decl. 6.)2 The user is also asked to select a topic and category for the report from a list of more then 500 available choices such as "Dining" or "Court Judges." (Id. 7.) In Step 3, users are presented with a blank box where they can add the text of the report. Other than generic style guidelines, such as "DO NOT use ALL CAPITAL LETTERS," the page does not encourage, solicit, or instruct users to say anything in particular. (Id. 8.) Step 4 allows users to attach (Id. 9.) Finally, in photos or images to their report if they wish. Step 5, users are asked to review the Terms of Service, which require the users to (among other things) refrain from posting anything false or defamatory. (Id. 10.) Users are also required to review and affirm that their reports are valid and to check a box indicating as much. Every user-generated submission to the Ripoff Report website is reviewed by a staff of monitors who are authorized to make minor editorial changes to redact certain types of content e.g., offensive language, social security numbers, bank account numbers, profanity, threats. (Id. 11.) Ripoff Report staff is not authorized to make (Id.)3 After a report has been any other changes to the reports. reviewed by the staff it is posted to the website using a standard 2 Plaintiffs attempt to dispute the facts noted in the previous two sentences, but Plaintiffs' arguments indicate that there is no actual dispute; Plaintiffs are simply quibbling over phrasing. For example, Plaintiffs state that these facts are disputed because: "[Users] are required to disclose certain information regarding an individual or company at the Web site's direction." (PSGI 69.) The Court sees no meaningful distinction between Plaintiffs' qualifications and the information contained in the Declaration of Ben Smith, upon which Defendants rely for these facts. Thus, the Court accepts these facts as undisputed. 3 Plaintiffs dispute this fact and assert that the Defendants also add the term "Ripoff Report" to the text supplied by the author for the title of the report. (PSGI 80.) In support of this fact, however, Plaintiffs cite an answer filed by Defendants in a separate case, Certain Approval Programs, LLC v. Xcentric Ventures, Case No. CV 08-1608-PHX-MHB, in 2008. While this Answer indicates Defendants' practices in 2008, Plaintiffs do not offer any evidence that Defendants added the term "Ripoff Report" to user-generated reports at the times relevant to this action. 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 26 27 28 format. (Id. 12 and Exh. F.) Anyone who wishes to respond to the report may do so by posting a comment or a rebuttal for free at any time. (Id. 13; PSGI 20-21.) The only requirement for posting a rebuttal is that the user must create a free account with the Ripoff Report website. (Id. 13.) Finally, when a report is submitted to the Ripoff Report website, Xcentric's servers automatically combine the unique text supplied by the author with various HTML code that is generic to every page on the website. (Id. 14.) During this process, and using keywords supplied by the author in the text of the report (such as the name of the company being reported), Xcentric's servers automatically create "meta tags," which are used by search engines such as Google and Yahoo to index the contents of the specific page at issue. (Id.) Xcentric's servers also automatically include three different keywords rip-off, ripoff, rip off into the meta tags of every page on the website. (Id. 15.) The meta tags are not visible in the title or body of any particular report; they are simply indexing references used by search engines in order to accurately reflect the source of the indexed page. (Id. 15.) However, individuals with basic technical knowledge who choose to view the actual HTML code for a report's webpage can view the meta tags that are used for indexing purposes. C. (Id. 14.) Ripoff Report's Corporate Advocacy Program When a user posts a negative report on the Ripoff Report website, the subject of the complaint has various options for addressing the negative report. First, the subject may post a free "rebuttal" or comment to the third-party report explaining his or her side of the story. (PSGI 20-21.) Second, a company or individual can deal with 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 26 27 28 negative reports by joining Ripoff Report's Corporate Advocacy Program ("CAP"). (See PSGI 23.) Magedson describes the purpose of the CAP program as follows: "The goal of the program is to ensure that complaints submitted by unhappy customers are resolved and that the root problems which caused these complaints are fixed so that future complaints can be reduced or avoided." 2010, 9.) (Magedson Decl., dated May 24, A company who joins the CAP program is required to agree in writing that it will work with the Ripoff Report and the complainants to resolve the complaints. (Id. 10, 15.) As a condition of joining the CAP program, the company is required to accept some level of responsibility for customer complaints even if it does not agree with them. (Id.) Once a company joins CAP, Ripoff Report agrees to act as a liaison between the CAP member and the persons who posted negative reports about the CAP member on the website. (Id. 11.) Ripoff Report sends an email that was drafted with the CAP member's input to each author who has submitted a report about that CAP member. Decl., Exh. M.) (Id.; see Mobrez The email explains that the CAP member has joined the program and has made a commitment to resolve the customer's complaint quickly and fairly. (Magedson Decl. 11.) Ripoff Report also posts a message at the top of every complaint posted about the CAP member on the website, explaining that the member has joined the CAP program and is committed to increasing customer satisfaction and working with Ripoff Report to resolve past and future complaints. Decl., Exh. M.) (Id. 12; Mobrez Finally, the Ripoff Report website states that members in the CAP program will be permitted to "provide your side of 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 26 27 28 the story and link to your own website, where you may post your commitment." (Mobrez Decl., Exh. M.) Membership in the CAP program never includes the removal of reports, nor does Ripoff Report change the text of the user-submitted reports for CAP members. (Magedson Decl. 13.) The only alteration to the reports is to add an introduction to each report explaining that the company has joined the program. (Id.) There is no evidence that Ripoff Report has ever removed a report from its website in exchange for money, nor is there any evidence that Defendants promised to do so. It is undisputed that membership in the CAP program requires the payment of an initial flat fee of $7,500, as well as a monthly fee. (PSGI 29; Xcentric Depo. at 40.) However, there is some dispute as to Plaintiffs have submitted evidence how the monthly fee is calculated. of a page on the Ripoff Report website, which describes the CAP program in some detail and states that the monthly fees are based "upon the number of Reports filed, the number of offices you have, and/or the size of an average sale." (Mobrez Decl., Exh. M.) Magedson testified, however, that this statement on the website is in error and that the only method he has ever used to calculate the monthly fee for the CAP program is the number of complaints filed regarding the CAP member. (Magedson Decl., dated June 23, 2010, 4-6; Magedson Depo. at 101, attached as Exhibit 7 to Borodkin Decl.). It is undisputed that Plaintiff AEI never joined the CAP program and never paid any money to Defendants. D. Reports About AEI (DSUF 46.) On or about February 2009, Plaintiffs Mobrez and Llaneras conducted a search on Google.com for Internet sources referring to the 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 26 27 28 terms "Raymond Mobrez," "Mobrez," "Iliana Llaneras," "Llaneras," and "AEI." (Mobrez Decl., dated March 29, 2010, 3 [Docket No. 11].) At that time, Plaintiffs discovered that there were four reports about AEI, Mobrez, and/or Llaneras posted on the Ripoff Report website. (Id.) To date, there are six reports regarding Plaintiffs on (Id. 4.) Two of the reports were filed in (Magedson Decl., dated May Defendants' website. February 2010, after this action was filed. 24, 2010, 59.) Generally, the reports written about Plaintiffs purport to be written by former employees of AEI and state that AEI is a bad place to work. (See DSUF 12-18; Mobrez Depo., Exhs. 1A, 2A, 3A, 4A, 5A, 6A.) Among other things, the reports state the following: "They reduce pay illegally;" "Complete disorganization;" "[T]hey have no idea to [sic] run any business and just continue to ruin people's lives . . .;" "[O]nce you start working, nothing ever gets done. . . . There are a couple of theories that could explain this paradox. One is that they are laundering money . . .;" "They treat their employees like dirt;" "Asia Economic Institute it's a SCAM;" and "They routinely ignore employment laws." (Id.) The reports also call into question whether Mobrez's stated credentials are accurate and state that Mobrez hires and fires on the basis of race, religion and gender. (Id.) Other more innocuous comments include that Mobrez and Llaneras are "boring," "crazy," and "secretly married." (Id.) The six reports about Plaintiffs were created by third parties, not by Defendants Magedson or Xcentric.4 4 (DSUF 63; Magedson Decl., Plaintiffs dispute this fact by stating that: "Defendants have not yet disclosed the identity of the posters. Discovery is ongoing and Plaintiffs have a pending motion to compel discovery and a motion to bifurcate discovery." (PSGI 64.) This does not create a genuine dispute of fact as to the authors of the reports. First, the Plaintiffs' motion to compel only 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 26 27 28 dated May 24, 2010, 60; see Mobrez Depo. at 98:5-99:5, 107:22-108:17; Craven Decl. 7; Thompson Decl. 7; Jordan Decl. 7.) Before the reports were posted on the site, each report was reviewed by one of Xcentric's staff of content monitors. (DSUF 65.) Ripoff Report's servers automatically create a log showing the identity of each content monitor who reviewed the reports about AEI before they were posted. (DSUF 66.) The reports that were posted on January 28, 2009, June 1, (Thompson 2009, and February 19, 2010 were reviewed by Amy Thompson. Decl. 6; Smith Decl. 17.) was reviewed by Kim Jordan. The report posted on February 13, 2009 The (Jordan Decl. 6; Smith Decl. 17.) report posted on September 30, 2009 and February 3, 2010 were reviewed by Linda Craven. (Craven Decl. 6; Smith Decl. 17.) All three witnesses have submitted declarations stating that they did not create or alter any part of these reports about AEI. Thompson Decl. 7; Jordan Decl. 7.) E. Communications Between the Parties Regarding the AEI Reports5 (Craven Decl. 7; When Plaintiffs first learned about the reports concerning AEI on the Ripoff Report website, Plaintiff Mobrez sent an email to the address for Ripoff Report, info@ripoffreport.com, on February 15, 2009. (Mobrez Decl.6 4, Exh. A.) The email stated that Mobrez was aware of sought a continuation of the Magedson Deposition; it did not relate in any way to a request for information about the authors of the reports. As far as the Court can tell, Plaintiffs had not made a discovery request for information regarding the authors of the reports prior to the filing of their Opposition. Further, Defendants have declared that they did not create the reports, and Plaintiffs have not come forward with any evidence rebutting that assertion. Thus, the Court accepts as undisputed the testimony of Magedson, Craven, Thompson, and Jordan that they did not create the reports at issue. 5 The Court has not considered the electronic recordings of the communications between Defendant Magedson and Plaintiff Mobrez, for the reasons stated below. Thus, the Court summarizes the facts contained in the declarations of Magedson, Mobrez, and Llaneras, including the corrected declarations filed on May 20, 2010. 6 For purposes of this section, "Mobrez Declaration" refers to the original Declaration of Raymond Mobrez filed on May 3, 2010 detailing his contact with Defendants. "Corrected Mobrez Declaration" refers to the Declaration of Raymond Mobrez filed on May 20, 2010 detailing his contacts with Defendants. 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 26 27 28 some of the reports about himself and AEI on the Ripoff Report website, that the reports were false, "defamatory and libelous," and that the recipient of the email needed to "immediately remove these derogatory remarks." (Id., Exh. A.) The email also requested the names and contact information of the individual(s) who posted the report(s) on the website. (Id.) Defendants did not respond. (Mobrez Decl. 4; Magedson Decl., dated May 24, 2010, 20.) On April 3, 2009, AEI posted a free rebuttal to each of the reports concerning AEI, Mobrez, and Llaneras on the Ripoff Report website. (Mobrez Decl. 5, Exh. B.) On April 27, 2009, Mobrez placed three separate calls to the main telephone number listed on the Ripoff Report website. (DSUF 24.) Mobrez does not recall specifically what was said on the calls. (Corrected Mobrez Decl. 2-4.) The next day, on April 28, 2009, Mobrez sent an email to the email address EDitor@ripoffreport.com. (Mobrez Decl. Exh. D.) The email stated that Mobrez had spoken with someone at the Ripoff Report the previous day who had asked Mobrez to explain who he was and why he was calling. The email then explained that Mobrez was emailing because Mobrez reports about AEI were posted on the Ripoff Report website. asked the email recipient: "How can you assist us in removing these bogus posts from your website?" receiving this email. (Id.) Magedson does not recall ever (Magedson Decl., dated May 24, 2010, 22.) On May 5, 2009, Mobrez again contacted the Ripoff Report by phone and spoke to someone who identified himself as Ed Magedson. Decl. 10; see Magedson Decl. 11.) (Mobrez Mobrez does not recall what (Mobrez Corrected specifically was said during that conversation. Decl. 2-4.) After the conversation, on May 5, 2009, Mobrez re-sent 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 26 27 28 his April 28, 2009 email to Magedson at EDitor@ripoffreport.com. (Mobrez Decl. 11, Exh. F.) Magedson recalls receiving this email. (Magedson Decl., dated May 24, 2010, 22.) On the same day, May 5, 2009, Magedson responded to Mobrez's email with a lengthy form email, which he normally sends to people who email Magedson asking about their options for responding to a report. Mobrez Decl., Exh. G.) Exh. G.) The form email spans six pages. (Id.; (Mobrez Decl., Among other things, the email states that Ripoff Report does not verify or investigate the truth of complaints posted on its website and encourages the subjects of reports to file a free rebuttal to any reports. (Id.) The email also includes a warning to those persons who The email states: "To those are thinking of suing the Ripoff Report. of you who threaten to sue, be prepared to go the long haul, and when you want to do a walk away because you realize you cannot and will not win because you filed a frivolous law suit, . . . you will be paying for our legal bill and in some cases and then some, before we will let you out of the case." (Id.) The email goes on, "Suing us will only get you more publicity and additional listings on search engines . . . Why do we win? just do a Google search for Communications Decency Act." (Id.) The email also emphasizes several times that Ripoff Report never removes reports from the website, and that it will not do so for any amount of money. (Id.) The email states that the website allows the authors of the reports to update their report with positive or negative information, but the reports are never removed. (Id.) The May 5, 2009 email also contains some limited information about the Ripoff Report's Corporate Advocacy Program ("CAP"). (Id.) The email states that the CAP program: (1) "changes the negative listings 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 26 27 28 on search engines into a positive along with all the Reports on the Ripoff Report . . . (Reports are never deleted)"; (2) "allows [the Ripoff Report] to email everyone who file[d] a complaint that the business has contacted Ripoff Report and wants to make things right"; and (3) "this . . . is later Reported in our findings about your company we post to every Report about your business." (Id.) The May 5, 2009 email also contains a link to the "intake form" for the CAP program, and also includes a link to a page on the website with more information about the CAP program. (Mobrez Corrected Decl., Exh. M.) The May 5, 2009 email does not contain any demand for money or even any reference to fees for the Corporate Advocacy Program. Decl., Exh. G.) (Mobrez The email does not contain any promise to take down a report from the website in exchange for money in fact, it expressly disavows doing so. Similarly, the email does not contain any promise that joining the CAP will result in future reports being blocked from the website. (Id.) The webpage to which the May 5, 2009 email provides a link (Mobrez Corrected Decl., Exh. M) describes the CAP program in broad terms. For example, it indicates that membership in the program will authorize the Ripoff Report to contact the authors of reports to try and facilitate a resolution, and that CAP members authorize the Ripoff Report to include a positive message at to the top of each report about the CAP member. (Id.) The webpage also states that membership in the CAP program requires the payment of an initial flat fee and monthly payments, but does not state the amount of such fees. (Id.) After receiving the May 5, 2009 email, Mobrez again spoke to Magedson by phone. (Mobrez Decl. 13; Magedson Decl., dated May 24, 14 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 26 27 28 2010, 14.) phone call. Mobrez does not recall specifically what was said on this (Mobrez Corrected Decl. 2-4.) On May 12, 2009, Mobrez again contacted Magedson by telephone. (Mobrez Decl. 14; Magedson Decl., dated May 24, 2010, 30.) was the final telephone conversation between the parties. This (Id.) Mobrez does not recall specifically what was said during this phone call. (Mobrez Corrected Decl. 2-4.) Magedson recalls that he told Mobrez that he needed to receive an email with Mobrez's CAP application form before Magedson could engage in any further discussions with him. (Magedson Decl., dated May 24, 2010, 30.) Magedson recalls that Mobrez told him that he had already sent an email to Magedson, which Magedson understood as meaning that Mobrez had completed the CAP application form. (Id.). After this phone call, Magedson looked for a completed CAP application form filled out by Mobrez, but could not find one. (Id. 32.) Thus, later that day, Magedson sent an email to Mobrez stating that Mobrez "drove him crazy" because Magedson spent so much time looking for a form Mobrez never filled out. (Id.) On July 24, 2009, Mobrez and Magedson had two final email conversations. First, Mobrez emailed Magedson and told him once again that the reports about AEI, Mobrez, and Llaneras on the Ripoff Report website were false and easily disproved. (Mobrez Decl., Exh. J.) Mobrez stated that he could not fill out the CAP application form because it would require AEI to stipulate to things it had not done, things which were "flagrant untruths." (Id.) Mobrez asked Magedson if he ever came to Los Angeles so that the two of them could meet in person. (Id.) Magedson responded by email the same day. (Mobrez Decl., Exh. K.) Magedson stated that there was no sense in meeting and 15 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 26 27 28 that, "I want to help you, but there is nothing we can do." stated: "We do not remove reports. Magedson We've spent over 3.4 million in We DO NOT REMOVE (Id.) The legal fees never lost a case people know. REPORTS. . . . No amount of money can change this." parties did not speak again prior to the filing of this lawsuit. Magedson contends that he had a total of four telephone conversations with Mobrez in April and May of 2009, all of which were initiated by Mobrez. (Magedson Decl., dated May 11, 2010, 14.) (Id.) Magedson Magedson declares that he never called Mobrez. declares that, during these telephone conversations, he never asked Mobrez for money, never asked him if his company was profitable or how it made money, never told him that the payment of a fee to Xcentric would result in negative information being changed into a positive, and never told Mobrez that a lawsuit against Ripoff Report was likely to fail. (Id.) Plaintiffs offer no evidence to rebut Magedson's account Finally, Magedson declares that, as a of these four phone calls.7 general policy, he never discusses the CAP program over the phone with anyone unless they have already contacted the Ripoff Report in writing to apply for the program, which Mobrez never did. (Id. 16.) As stated above, Mobrez admits that he does not accurately recall what was said in the phone conversations with Magedson in April and May 2009 and that he had "confused some of what was said in my telephone conversations with what was written in the e-mail correspondence between myself and Mr. Magedson." (Mobrez Corrected Decl. 2-4.) Mobrez declares that "[t]here were a number of calls made by me to Initially both Mobrez and Llaneras filed Declarations on May 3, 2010 in which they described the April and May 2009 phone conversations between Magedson and Mobrez. The Plaintiffs' descriptions of those calls differed significantly from Magedson's account. However, on May 20, 2010, both Plaintiffs filed amended declarations and testified that their previous accounts of the phone calls were inaccurate. 7 16 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 26 27 28 Ripoff Report. In addition, there were a number of incoming calls to (Id. 2.) Mobrez declares that he me from Ripoff Report." specifically recalls "a telephone conversation with someone who mentioned `five grand' as the cost for joining the Corporate Advocacy Program," but does not remember the exact date or time of the call and does not know who the speaker was, or if it was Magedson. (Id. 5.) Finally, Plaintiff Llaneras declares that during one phone call, Mobrez instructed her to listen in on another receiver and she heard Mobrez discussing money with someone she could not identify. Corrected Declaration 4.) III. MOTION FOR SUMMARY JUDGMENT A. Scope of the Motion (Llaneras As a preliminary matter, the Court notes that it has only considered those arguments in Defendants' summary judgment motion related to Defendants' liability under the RICO statutes based on the alleged predicate acts of extortion. Although Defendants moved for summary judgment as to Plaintiffs' entire case, such a motion was inappropriate given the Court's prior Order bifurcating the RICO/extortion claims from the remaining claims and from the issue of damages. B. Legal Standard Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Tarin v. County of Los Angeles, 123 F.3d 1259, 1263 (9th Cir. 1997), superseded by statute on other grounds, as stated in Leisek v. 17 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 26 27 28 Brightwood Corp., 278 F.3d 895, 899 n.2 (9th Cir. 2002). "A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the parties' differing versions of the truth." SEC v. Seaboard Corp., 677 F.2d 1289, 1293 (9th Cir. 1982). The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Catrett, 477 U.S. 317, 323-24 (1986). See Celotex Corp v. If that party bears the burden of proof at trial, it must affirmatively establish all elements of its legal claim. Southern Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, Otherwise, the moving party may 888 (9th Cir. 2003) (per curiam). satisfy its Rule 56(c) burden by "`showing' -- that is, pointing out to the district court -- that there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 325. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." 322. Once the moving party has met its initial burden, Rule 56(e) requires the nonmoving party to go beyond the pleadings and identify specific facts that show a genuine issue for trial. See id. at 323-34; To Id. at Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). demonstrate a genuine issue, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . [T]he nonmoving party must come forward with specific Matsushita facts showing that there is a genuine issue for trial." Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). A scintilla of evidence or evidence that is merely colorable or not significantly probative does not present a genuine issue of 18 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 26 27 28 material fact. Cir. 2000). Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Only genuine disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. See Anderson, 477 U.S. at 248; see also Aprin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001) (the nonmoving party must identify specific evidence from which a reasonable jury could return a verdict in its favor). When deciding whether a genuine issue of fact exists, the Court may not engage in credibility determinations or the weighing of evidence; such functions are the province of the jury, not the judge. Anderson, 477 U.S. at 255. C. Evidentiary Objections In support of their Motion for Summary Judgment, Defendants seek to introduce evidence of six audio recordings which purport to be recordings of the telephone calls that Mobrez made to Magedson on April 27, 2009 (two calls), May 5, 2009 (two calls), May 9, 2009 (one call), and May 12, 2009 (one call). (Mobrez Depo., Exh. 25 [compact disc Defendants seek to containing audio files of the recordings].) introduce these recordings to rebut the May 3, 2010 declarations that Plaintiffs Mobrez and Llaneras8 filed with the Court in which they recounted the substance of their telephone conversations with Magedson in April and May 2009.9 Defendants contend that the recordings prove Llaneras never spoke with Magedson directly; however, she claimed in her May 3, 2010 declaration that she had listened to three calls between Mobrez and Magedson by picking up an additional phone receiver. 9 At the April 19, 2010 status conference, the Court ordered Plaintiffs Mobrez and Llaneras, as well as Defendant Magedson, to file detailed declarations indicating every conversation between Plaintiffs and Defendants that Plaintiffs believed supported their claim that Defendants engaged in attempted extortion (as a predicate act to the RICO claims.) Plaintiffs filed their declarations with the Court on May 3, 2010. Magedson filed his declaration with the Court on May 11, 2010. 8 19 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 26 27 28 that the phone conversations were nothing like what was described in Plaintiffs' declarations, and that several of the statements Plaintiffs attributed to Magedson for example, demands for money simply never occurred. Mobrez's phone records indicate that in April and May 2009, Mobrez called Magedson a total of seven times. 21.) 50.) (DSUF 46; Mobrez Depo., Exh. (DSUF One of these calls, on April 27, 2009, was not recorded. The remaining six calls were automatically recorded by a third- party vendor hired by Xcentric to record all telephone calls to Ripoff Report's main phone number. 29.) (Magedson Decl., dated May 24, 2010, In April and May 2009, persons calling the Ripoff Report main telephone number were not given notice that their calls would be recorded. (Mobrez Corrected Decl. 12; Borodkin Decl. 6, Exh. 3 [Magedson Depo.].) Magedson testified that once a call is recorded, the third party vendor automatically emails Magedson an audio file which contains a copy of the recorded call. (Id. 29.) On April 20, 2010, Magedson reviewed the audio files of every recorded call made to the Ripoff Report's main telephone number over a period of several months a total of 4,537 calls. (Id. 27.) Magedson declares that the six audio recordings submitted to the Court are true, complete, and unaltered copies of recordings automatically created by Xcentric's third party vendor. (Id. 25, 29.) Plaintiffs contend that the recordings are inadmissible and cannot be considered on summary judgment. Plaintiffs assert three primary objections to the recordings: First, Plaintiffs argue that California 20 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 26 27 28 Penal Code 632(a)10 prohibits a person from recording a confidential communication without the consent of all parties to the communication, and Section 632(d) makes such recordings inadmissible in both civil and criminal proceedings. Second, Plaintiffs contend that the recordings should be excluded under Federal Rule of Civil Procedure 37(c) because Defendants failed to disclose the recordings in their initial disclosures. Third, Plaintiffs contend that the recordings are inadmissible because they were not properly authenticated under Federal Rule of Evidence 902 and Defendants refused to disclose the name of the third party vendor to Plaintiffs. 1. California Penal Code 632 California Penal Code 632(a) makes it a criminal offense to "intentionally and without the consent of all parties to a confidential communication, by means of any electronic amplifying or recording device, eavesdrop[] upon or record[] the confidential communication . . . ." Additionally, subsection (d) provides that no evidence obtained as a result of eavesdropping upon or recording a confidential communication shall be admissible in "any judicial, administrative, legislative, or other proceeding." Cal. Penal Code 632(d). A confidential communication is defined as "any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto," but excludes communications that reasonably may be expected to be overheard or recorded. Id. Here, it is undisputed that Mobrez was unaware that his calls with Magedson were being recorded and that Mobrez did not give consent for 10 Both parties repeatedly referred to California Penal Code 623, which is wholly irrelevant to this case. The relevant eavesdropping statute is California Penal Code 632. 21 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 26 the recordings. (Mobrez Corrected Decl. 12; Borodkin Decl. 6, Exh. Thus, at the very least, some of the recordings 3 [Magedson Depo.].) that Defendants seek to admit were obtained in violation of California Penal Code 632(a).11 Furthermore, even though the recordings complied with the laws in the forum state in which the recordings were made (Arizona), if the Court were to engage in a choice-of-law analysis between Arizona and California law, the Court undoubtedly would apply California law, given California's strong public interest in protecting the confidentiality of certain communications. See Downing v. Nonetheless, Abercrombie & Fitch, 265 F.3d 994, 1006 (9th Cir. 2001). neither California Penal Code 632 nor Arizona law is relevant to the present action. The present action is based on federal law (as well as state law) and is proceeding in federal court. In such cases, "the Ninth Circuit has consistently held that [recordings of conversations] [are] admissible in federal court proceedings when obtained in conformance with federal law and without regard to state law." Roberts v. Americable International, Inc., 883 F. Supp. 499, 503-04 (E.D. Cal. 1995) (citing United States v. Adams, 694 F.2d 200, 201-02 (9th Cir. 1982)); see Feldman v. Allstate Ins. Co., 322 F.3d 660 (9th Cir. 2003); United States v. Cormier, 220 F.3d 1103, 1111 (9th Cir. 2000); United States v. Little, 753 F.2d 1420, 1434 (9th Cir. 1984). explained in Roberts: [Plaintiff's] argument has consistently been that his state law `privacy privilege' [under California Penal Code 632] has been invaded by [defendant's] actions. However, as previously noted, this present action is based on federal law 11 As the court 27 28 Voice mails would not fall within the prohibitions of California Penal Code 632 because voice mails are necessarily recorded (and expected to be so) and therefore do not constitute "confidential communications." Two of the recordings at issue are of voice mails that Mobrez left for Magedson. 22 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 26 27 28 as well as state law. It is well settled the federal law applies to privilege claims brought in actions based in whole or in part on federal law. Id. at 504 (citing Pagano v. Oroville Hospital, 145 F.R.D. 683, 687 (E.D. Cal. 1993); Heathman v. U.S.D.C., 503 F.2d 1032, 1034 (9th Cir. 1974)). Thus, Plaintiffs' motion to exclude the tape recordings must be examined under federal law.12 The Omnibus Crime Control and Safe Streets Act ("the Act") is the federal law that regulates the interception of oral communications. U.S.C. 2510 et. seq. Section 2511(2)(d) provides that the 18 interception of wire, oral, or electronic communications shall not be unlawful where the interception is done by a party to the conversation or where one of the parties to the conversation has given prior consent to such interception, unless the communication is intercepted for the purpose of committing any criminal or tortuous act. 2511(2)(d). 18 U.S.C. In the present case, Defendants Xcentric and Magedson clearly gave prior consent to the third party vendor to record all telephone calls coming into the main Ripoff Report telephone number. Further, there is no evidence, nor any suggestion, that the purpose of the recordings was to perpetrate a criminal or tortuous act. Although The result would be different if this case were proceeding on the ground of diversity jurisdiction. In diversity cases, "a federal court must conform to state law to the extent mandated by the principles set forth in the seminal case of Erie R.R. v. Thompkins, 304 U.S. 64 (1938)." Feldman v. Allstate Ins. Co., 322 F.3d 660, 666 (9th Cir. 2003). "State evidence rules that are `intimately bound up' with the state's substantive decision making must be given full effect by federal courts sitting in diversity." Id. The Ninth Circuit has concluded that California Penal Code 632 embodies "a state substantive interest in the privacy of California citizens from exposure of their confidential communications by third parties," and therefore is "properly characterized as substantive law within the meaning of Erie" and must be applied in diversity cases. Id. at 667. Here, however, the Court has federal question jurisdiction. Furthermore, Defendants are asking the Court to use the tapes as evidence to rebut the federal claims asserted by Plaintiff i.e., the RICO causes of action. Thus, as stated above, federal law relating to the interception of wire communications applies. 12 23 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 26 27 28 Plaintiffs allege that Defendants used the phone to communicate extortionate threats to Plaintiffs, even if that were true, there is no suggestion that the recordings were used for the purpose of extortion. To the contrary, Defendants have presented evidence that all calls to the Ripoff Report's main telephone number were recorded in the ordinary course of business. federal law. In sum, because the recordings at issue comply with federal law, they may be admitted as evidence without regard to California Penal Code 632. 2. Failure to Disclose Recordings in Initial Disclosures Therefore, the recordings at issue do not violate Next, Plaintiffs argue that the Court should exclude the tape recordings under Federal Rule of Civil Procedure 37(c). Rule 37(c) provides that "if a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." Plaintiffs assert that Defendants failed to disclose the recordings in their initial disclosures on April 21, 2010, as required under Rule 26(a), even though Defendants knew of such tape recordings before April 21, 2010. Instead, Defendants waited until May 7, 2010 to disclose the tape recordings at the deposition of Plaintiff Mobrez. This argument also fails. As Plaintiffs recognize in their briefs, Rule 26(a) does not require parties to disclose impeachment evidence in their initial disclosures. Gribben v. United Parcel In the context of Service, Inc., 528 F.3d 1166, 1172 (9th Cir. 2008). 24 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 26 27 28 the present motion, Defendants seek to introduce the tape recordings only to impeach Plaintiffs' accounts of the conversations between Mobrez and Magedson. that limited purpose. 3. Inadmissible Under the Federal Rules of Evidence At a minimum, the recordings are admissible for Plaintiffs' final objection is that the recordings were not properly authenticated and are inadmissible under the Federal Rules of Evidence 902 and 1002. The Court agrees. "When offered into evidence, a tape recording must normally be accompanied by proof that the recording is what it is purported to be." WILLIAM E. WEGNER, TRIALS AND AND ROBERT E. JONES, GERALD E. ROSEN, JEFFREY S. JONES, RUTTER GROUP PRACTICE GUIDE: FEDERAL CIVIL The proponent of EVIDENCE 8:472 (2009); Fed. R. Evid. 901(a). the evidence must show that the tape is a "true, accurate, and authentic recording of the conversation, at a given time, between the parties involved." (N.D. Ill. 1998). United States v. Andreas, 23 F. Supp. 2d 835, 840 Courts generally consider the following foundational factors when determining whether a tape recording is admissible: (1) whether the recording device was capable of taking the conversation; (2) whether the operator of the device was competent to operate it; (3) whether the recording is authentic and correct; (4) whether no change, additions or deletions have been made to the recording; (5) whether the recording has been preserved in a manner that is shown to the court; (6) whether the speakers are identified; and (7) whether the conversation elicited was made voluntarily and in good faith. TRIALS AND JONES & ROSEN ET AL., RUTTER GROUP PRACTICE GUIDE: FEDERAL CIVIL EVIDENCE 8:472.2 (citing United States v. Oslund, 453 F.3d 1048, 1057 (8th Cir. 2006), Penguin Books U.S.A., Inc. v. New Christian 25 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 26 27 28 Church of Full Endeavor, Ltd., 262 F. Supp. 2d 251, 264 (S.D.N.Y. 2003)). Here, Defendants offer the Declaration of Edward Magedson to authenticate the recordings. record the conversations. However, Magedson admittedly did not At best, Magedson can only state that the recordings submitted to the Court are accurate copies of the audio files that he was emailed by the third party vendor that actually made the recordings. (Magedson Decl., dated May 24, 2010, 25-29.) Defendants have refused to reveal the name of the third party vendor to the Plaintiffs despite the Plaintiffs' reasonable request (see Magedson Depo. at pg. 74) and have not offered any declarations from the third party vendor or any information about the method of recording, the equipment used, or how the recordings are kept in the ordinary course of the vendor's business. Defendants have not produced the original recordings to the Court or to the Plaintiffs. Further, the foundational shortcomings are especially problematic here because Plaintiffs have presented facts indicating that the recordings may not be accurate or trustworthy. Specifically, Mobrez's phone records indicate the duration of each of the calls made from Mobrez to Magedson in March and April 2009. (Mobrez Depo., Exh. 21.) In most instances, the duration of the calls is considerably longer than the length of the recorded conversation submitted to the Court. Thus, Plaintiffs suspect that the recordings may have been altered or edited. While Defendants have a ready explanation for the time discrepancy that is, that the third party vendor does not begin recording the calls until after the caller has navigated through an automated series of prompts, which takes some time neither the Court 26 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 26 nor the Plaintiffs can verify this without testimony from the third party vendor who actually recorded the conversations. Finally, Magedson's assertion that he did not personally alter or edit the recordings does not resolve the issue,13 as the recordings could have been altered by the third party vendor. For these reasons, the Court finds that the tape recordings have not been properly authenticated and are not admissible as evidence in support of Defendants' motion for summary judgment. Nonetheless, this ruling does not change the landscape of the summary judgment motion to any significant degree. After the recordings were revealed to Plaintiffs during the Mobrez deposition on May 7, 2010, but before the summary judgment motion was filed, Mobrez and Llaneras each filed declarations with the Court seeking to correct their May 3, 2010 declarations. In Mobrez's corrected declaration filed on May 20, 2010, Mobrez admits that when he filed the May 3, 2010 declaration, he was "mistaken as to the substance of the six phone conversations between [himself] and Magedson" and that he had "confused some of what was said in [his] telephone conversations with what was written in e-mail correspondence." (Mobrez Corrected Decl. 2, 4.) Similarly, in Llaneras's corrected declaration filed on May 20, 2010, Llaneras states that "the descriptions of the telephone conversations in my May 3, 2010 declaration were not accurate" and that she too "had . . . confused some of what [she] overheard with some of what [she] had read in emails." (Llaneras 3.) Thus, Mobrez and Llaneras now have each admitted that their May 3, 2010 testimony regarding the phone 13 27 28 This statement is not entirely accurate either, as Defendants admitted in later briefing that the actual electronic files provided to Plaintiffs had been redacted so as to exclude the name of the third party vendor in the file titles. (Defs. Response to Objections at 9.) 27 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 26 27 28 calls with Magedson is inaccurate and unreliable. Additionally, Mobrez and Llaneras did not offer any additional description of what was said during the April and May 2009 phone calls in their corrected declarations, with one exception. The corrected declarations each make some reference to Mobrez having a telephone conversation on an unspecified date with an unidentified person who mentioned "five grand" as the cost of joining the Corporate Advocacy Program. 5; Llaneras Decl. 4.) In sum, even excluding the recorded phone calls, the only evidence that the Court can consider regarding the communications between Plaintiffs and Defendants that are relevant to Plaintiffs' extortion claim are: (1) the emails between the parties; (2) the limited information contained in the Mobrez and Llaneras corrected declarations filed on May 20, 2010 that is, information about the emails and about the call regarding "five grand;" and (3) Magedson's testimony regarding the substance of his calls with Mobrez, which is not refuted by Plaintiffs' corrected declarations. For the reasons stated below, the (Mobrez Decl. Court finds that this evidence, even construing all reasonable inferences in support of Plaintiffs, fails to demonstrate a triable issue on Plaintiffs' RICO claims.14 D. Plaintiffs' RICO Claims Plaintiffs contend that Defendants were part of an enterprise engaged in a pattern of racketeering activity in violation of 18 U.S.C. 1962(c), or alternatively, that Defendants conspired to violate the RICO statute under 18 U.S.C. 1962(d). 14 To assert a RICO claim, Further, it is clear from Plaintiffs' Opposition that Plaintiffs are not relying on the substance of the phone calls to support their claims that Defendants engaged in attempted extortion. Instead, Plaintiffs appear to rely solely on the emails Magedson sent to Mobrez and the content on Defendants' website. 28 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 26 27 28 Plaintiffs must prove the following elements: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity consisting of at least two predicate acts (5) causing injury to Plaintiffs' business or property. Chaset v. Fleer/Skybox Int'l, 300 F.3d 1083, 1086 (9th Cir. 2002); Gillmor v. Thomas, 490 F.3d 791, 798 (10th Cir. 2007); see Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 & n.14 (1985); 18 U.S.C. 1961(5). Section 1961 defines the predicate acts that constitute "racketeering activity" for purposes of the RICO statute. Plaintiffs contend that Defendants committed the predicate acts of attempted extortion under California Penal Code 518 and 523, and wire fraud under 18 U.S.C. 1343. In their motion for summary judgment, Defendants assert that Plaintiffs have not presented sufficient evidence to establish a triable issue of fact that Defendants engaged in the predicate act of extortion or attempted extortion. Court agrees. 1. Extortion For the reasons stated below, the California Penal Code 518 defines extortion as "the obtaining of property from another, with his consent, or the obtaining of an official act of a public officer, induced by a wrongful use of force or fear, or under color of official right." Cal. Penal Code 518. Section 519 of the Penal Code defines "fear" as follows: Fear, such as will constitute extortion, may be induced by a threat, either: 1. To do an unlawful injury to the person or property of the individual threatened or of a third person; or, 2. To accuse the individual threatened, or any relative of his, or member of his family, of any crime; or, 29 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 26 27 28 3. To expose, or to impute to him or them any deformity, disgrace or crime; or, 4. To expose any secret affecting him or them. Cal. Penal Code 519 (emphasis added). Under California Penal Code 523, a person who attempts to commit extortion through the sending of any writing referencing an actionable threat as defined in Section 519 is guilty of extortion, notwithstanding the fact that the person did not actually obtain any money or property by means of the threat. Cal. Penal Code 523; Monex Deposit Co. v. Gilliam, 666 F. Supp. 2d 1135, 1136-37 (C.D. Cal. 2009). Specifically, Section 523 provides: Every person who, with intent to extort any money or other property from another, sends or delivers to any person any letter or other writing, whether subscribed or not, expressing or implying, or adapted to imply, any threat such as specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat. Cal. Penal Code 523. In short, attempted extortion accomplished through means of a writing under Section 523 is actionable and constitutes a predicate act under RICO. See Streck v. Peters, 855 F. Supp. 1156, 1163 (D. Hawai'i 1994) (definition of racketeering activity under 18 U.S.C. 1961(1)(A) includes extortion or attempted extortion under state law). Finally, although not relied upon by Plaintiffs here, California Penal Code 524 criminalizes attempted extortion by means of a threat even where such threats are not made in writing. Cal. Penal Code 524. Plaintiffs contend that Defendants made two separate threats in writing in an attempt to extort money from Plaintiffs. The first is "the implied threat that negative statements about the subject of a Ripoff Report will remain online and prominently featured in search 30 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 26 27 28 results unless the subject joins the Corporate Advocacy Program ("CAP")." (Opp'n at 9.) Thus, Plaintiffs contend that "Defendants' (Id.) solicitations to join CAP are part of the implied threat." Second, Plaintiffs contend that Defendants "threaten to counter-sue anybody that sues them and that such litigants always lose and always pay Defendants' attorneys fees." (Id.) In support of this latter argument, Plaintiffs rely upon the standard email that Magedson sent to Mobrez on May 5, 2009, which contains a warning to the effect that suing the Ripoff Report would be a losing battle. these arguments in reverse order. a. The Threat to Sue The Court addresses As stated in the factual section above, on May 5, 2009, Magedson sent Mobrez a standard "form" email which contained a warning about suing the Ripoff Report. Specifically, the email reads: "To those of you who threaten to sue, be prepared to go the long haul, and when you want to do a walk away because you realize you cannot and will not win because you filed a frivolous law suit, . . . you will be paying for our legal bill and in some cases and then some, before we will let you out of the case." (Mobrez Decl., dated May 3, 2010, Exh. G.) The email also states that the Ripoff Report has been sued more than two dozen times and has never lost a case. It goes on: "If you are We thinking of suing us, I hope you are personally prepared for this. are." (Id.) Finally, the email invites readers to "do a Google search for Communications Decency Act" to understand why the Ripoff Report often wins lawsuits against it. (Id.) In sum, the email indicates that Ripoff Report has been sued in the past and has won, that Ripoff 31 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 26 27 28 Report will vigorously defend itself in any lawsuit, and that Ripoff Report will seek attorneys' fees for frivolous suits filed against it. The statements in the May 5, 2009 email are not actionable threats within the meaning of Section 519. First, Plaintiffs have not cited, and the Court has not found, any authority holding that the threat to defend oneself in a lawsuit brought by another constitutes extortion. The closest analogy is to cases where the defendant threatens to bring a civil or criminal action against the plaintiff if the plaintiff fails to pay a certain sum. Under California law, however, it is well- settled that the threat to take legal action cannot constitute extortion unless the threat was made with knowledge that the threatened claim was false and without merit. See Sosa v. DirecTV, Inc., 437 F.3d 923, 939-40 (9th Cir. 2006) (California's extortion statute does not impose liability for threats of litigation unless the asserted claims rise to the level of a sham); Furman v. California Satellite Sys., 179 Cal. App. 3d 408, 426 (Ct. App. 1986) ("to be actionable [in extortion] the treat of prosecution must be made with knowledge of the falsity of the claim"), disapproved on other grounds by, Silberg v. Anderson, 50 Cal. 3d. 205 (1990); Leeper v. Beltrami, 53 Cal. 2d 195, 204 (1959) (it is generally true that the threat to take legal action cannot constitute duress; the only exception is where, in making such threats, defendants knew the claim asserted was false); In the Matter of Gladys Nichols, 82 Cal. App. 73, 76 (Ct. App. 1927) (same). Here, Plaintiffs have not introduced any evidence that Defendants' "threats" to defend themselves in suits brought by others or to seek attorneys' fees for frivolous suits launched against them were made with knowledge of the falsity of such claims. To the contrary, the 32 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 26 27 28 Court can take judicial notice of the fact that Defendants have, in fact, been successful in numerous civil suits asserted against them in connection with the Ripoff Report. Further, various federal laws allow for the payment of attorneys' fees as a sanction for asserting a frivolous lawsuit. See 28 U.S.C. 1927; Fed. R. Civ. Proc. 11. Thus, the substance of the May 5, 2009 email does not allow for an inference that Defendants knowingly threatened to bring a false claim against Plaintiffs, and Plaintiffs have presented no other evidence in that regard. For this reason, Plaintiffs have failed to present any triable issue of fact regarding Defendants' implied threat to sue. Plaintiffs' argument fails for an additional, independent reason. Even if the statements in the May 5, 2009 email constituted actionable threats (which they do not), the statements are not connected with any attempt to obtain money or property from Plaintiffs. This is not a case where the defendants threatened to sue the plaintiff unless the plaintiff paid a certain sum or delivered property to defendants. Sosa, 437 F.3d at 926; Fuhrman, 179 Cal. App. 3d at 417; People v. Umana, 138 Cal. App. 4th 625 (Ct. App. 2006). To the contrary, nothing Cf. in the May 5, 2009 email (or any other evidence submitted to the Court) implies that Defendants will refrain from defending themselves in a civil suit or will forego the right to any possible counterclaim in exchange for money. At most, the May 5, 2009 email is an attempt to boast about Defendants' past legal successes and put the recipient on notice that Defendants will vigorously defend themselves in any lawsuits. This does not constitute extortion within the meaning of See Flately v. Mauro, 39 Cal. 4th 299, Sections 518, 519 or 523. (2006) ("rude, aggressive, or even belligerent pretrial negotiations, 33 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 26 27 28 whether verbal or written, that may include threats to file a lawsuit, . . . [do not] necessarily constitute extortion."). b. The Implied Threat Associated with the CAP Program Next, Plaintiffs contend that Defendants' "solicitations" to Plaintiffs to join the CAP Program constitute an implied threat that negative information about Plaintiffs will remain online and will be featured in search results unless Plaintiffs pay the fees for the program. Plaintiffs contend that this constitutes a threat to "expose, or to impute to [Plaintiffs] any deformity, disgrace or crime" or to "expose a secret affecting [Plaintiffs]." Cal. Penal Code 519. First, there is Plaintiffs' argument fails for several reasons. no evidence that Defendants ever threatened to impute to Plaintiffs any disgrace or to expose a secret affecting Plaintiffs. The negative reports about Plaintiffs that appeared on the Ripoff Report website did, in some instances, accuse Plaintiffs of crimes or impute to them a disgrace. But Plaintiffs have not presented any evidence that Defendants wrote any of the negative comments or reports about Plaintiffs or that Defendants contributed in any substantive way to the negative content of those reports. Similarly, Plaintiffs have not presented any evidence that Defendants instructed or encouraged anyone to write negative reports about Plaintiffs. Finally, there is no evidence that Defendants ever threatened that they would write or post more negative information about Plaintiffs if Plaintiffs did not join the CAP program. Nothing even coming close to such a threat appears in

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