Case 2:11-cv-01426-GMS Document 99 Filed 07/20/12 Page 1 of 10

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

David S. Gingras, #021097 Gingras Law Office, PLLC 3941 E. Chandler Blvd., #106-243 Phoenix, AZ 85048 Tel.: (480) 668-3623 Fax: (480) 248-3196 David@GingrasLaw.com Attorney for Plaintiff Xcentric Ventures, LLC

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA

XCENTRIC VENTURES, LLC, an Arizona limited liability company, Plaintiff, v. LISA JEAN BORODKIN et al., Defendants.

Case No.: 11-CV-1426-GMS MOTION FOR ENTRY OF DEFAULT JUDGMENT AS TO DEFENDANTS DANIEL BLACKERT AND ASIA ECONOMIC INSTITUTE, LLC

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Pursuant to Rules 54(b), 54(c), and 58(d), Federal Rules of Civil Procedure, Plaintiff XCENTRIC VENTURES, LLC (Plaintiff or Xcentric) hereby moves the Court to enter a Default Judgment in favor of Plaintiff and against the following Defendants: DANIEL F. BLACKERT (Mr. Blackert) and ASIA ECONOMIC INSTITUTE, LLC (AEI). Based on the failure of these defendants to appear or otherwise defend in this matter, Xcentric requests a Default Judgment awarding monetary relief on the grounds that (1) Plaintiff is entitled to the relief requested in the Complaint filed herein; and (2) Default has been entered against the above-named Defendants for failure to answer or otherwise defend as to all claims herein.

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

I.

DISCUSSION a. History of Action

As the Court is aware, this is an action primarily for malicious (civil) prosecution arising from a lawsuit previously pending in the U.S. District Court for the Central District of California, styled Asia Economic Institute, LLC v. Xcentric Ventures, LLC, Case No. 10-cv-01360 (the Asia Litigation). As alleged in 28 of Xcentrics original Complaint (Doc. #1) the Asia Litigation was commenced by Raymond Mobrez, his wife Iliana Llaneras, and their entity Asia Economic Institute, LLC acting as plaintiffs represented by Daniel Blackert. As further alleged in Xcentrics Complaint, the primary cause of action in the Asia Litigationfederal racketeering (RICO) predicated on attempted extortion by Xcentric and Edward Magedsonwas fabricated from whole cloth by Mr. Mobrez and his wife, Ms. Llaneras. After Mr. Mobrez and Ms. Llaneras were caught lying about the factual basis for their extortion claims, the district court entered summary judgment in Xcentrics favor as to the alleged extortion. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054 (C.D.Cal. July 19, 2010). Despite this, Mr. Mobrez and Ms. Llaneras continued to pursue their lawsuit as aggressively as possible, amending their Complaint twice to assert additional groundless claims and theories, all of which were ultimately resolved in Xcentrics favor. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2011 WL 2469822 (C.D.Cal. May 4, 2011). Immediately following the termination of the prior California action, Xcentric commenced this litigation which asserts three claims against AEI and its former attorney Mr. Blackert: 1.) wrongful commencement of civil litigation; 2.) wrongful continuation of civil litigation, and 3.) aiding and abetting tortious conduct. By failing to appear or defend in this matter Mr. Blackert and AEI have each admitted the factual allegations of the Complaint. See TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th

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Cir.1987) (The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.) 2

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(internal quotation marks omitted); see also Midwest Imports, Ltd. v. Coval, 71 F.3d 1311, 1313 (7th Cir. 1995) (a failure to contest the opposing partys facts is considered a binding admission of those facts.); Sun Valley Airlines, Inc. v. Avco-Lycoming Corp., 411 F.Supp. 598, 604 (D. Idaho 1976), (because these parties failed to answer or otherwise respond, and therefore such failure to respond is an admission of the claims asserted.). Moreover, under Rule 55 of the Federal Rules of Civil Procedure, a party who has not appeared is subject to immediate entry of judgment by default, without notice, on a motion by plaintiff. 6 MOORES FEDERAL PRACTICE, 55.03[2] at p. 55-20 (1994). Because liability is established by virtue of the Defendants default, this motion will focus solely on the question of damages. In addition, because this Court has

previously indicated that it will apply California law to Xcentrics claims, the following discussion is based on California law. b. Xcentric Is Entitled To Recover The Cost Of Defending The Prior California Action In an action for malicious (civil) prosecution, the plaintiff is entitled to recover a wide array of damages including: (c) the expense that he has reasonably incurred in defending himself against the proceedings ... . RESTATEMENT (SECOND) OF TORTS 681 (1977); Bertero v. Nat'l Gen. Corp., 13 Cal.3d 43, 59, 118 Cal.Rptr. 184, 529 P.2d 608 (Cal. 1974) (explaining, the measure of compensatory damages for the malicious prosecution of a civil action includes attorney fees and court costs for defending the prior action.); Crowley v. Katleman, 8 Cal.4th 666, 688, 34 Cal.Rptr.2d 386, 881 P.2d 1083 (1994) (same). Although other categories of damages are also available (i.e., reputational harm), for purposes of simplicity the only compensatory damages Xcentric seeks here are the attorneys fees and certain costs1 incurred in defending the prior California action. As the prevailing party in the prior action, Xcentric has already received a judgment against Mr. Mobrez, Ms. Llaneras and AEI for taxable costs in the amount of $4,949.03. These costs are expressly excluded from the recovery sought in this case. 3
1

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

As reflected in the Affidavit of Maria Crimi Speth submitted herewith, Xcentric incurred outside counsel fees of $91,993.00 defending itself in the California action. Ms. Speths affidavit establishes that these fees are reasonable and that they were necessarily incurred in the course of the prior California litigation. As such, they are recoverable here. See, e.g. CitiWide Preferred Couriers, Inc. v. Golden Eagle Ins. Corp., 114

Cal.App.4th 906, 91112, 8 Cal.Rptr.3d 199 (2nd Dist. 2003) (holding settled law permits [a malicious prosecution plaintiff] to recover the cost of defending the prior action including reasonable attorneys fees). In addition to the fees Xcentric paid to Ms. Speths firm, Xcentric also incurred various other litigation-related costs in the amount of $6,276.46. As reflected in the itemized billing statement attached as Exhibit A to Ms. Speths concurrently-filed Declaration, these costs include things such as Westlaw research charges ($3,226.46), travel expenses ($756.70) and other miscellaneous expenses for postage and long distance phone calls. Of these total costs, $138.68 has already been taxed against Mr. Mobrez, Ms. Llaneras, and AEI. Thus, Xcentric is entitled to recover the balance of previously untaxed costs of $6,137.78 ($6,276.46 - $138.68 = $6,137.78) Finally, in addition to the outside counsel fees it incurred, Xcentric further seeks an award of $177,930 for the value of legal fees incurred by its undersigned in-house counsel, David Gingras. As explained in the affidavit of counsel submitted herewith, inhouse counsel expended a total of 593.1 hours defending Xcentric in the Asia litigation. Multiplying the number of hours spent by a reasonable hourly rate of $300/hr. results in a total of $177,930. To be clearthis amount is not based on the actual salary of Xcentrics in-house counsel. Rather, the amount is based on a lodestar calculation of the number of hours spent and the reasonable hourly rate for the services performed. The California Supreme Court has expressly adopted and approved such a method when ascertaining the value of time spent by salaried in-house counsel. See PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1093, 997 P.2d 511, 517, 95 Cal.Rptr.2d 198, 205 (Cal. 2000) (explaining that 4

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

value of in-house counsels time should be calculated under lodestar method rather than actual salary of counsel to avoid discriminating unfairly between in-house and private counsel performing the same services ... [and] [b]ecause disallowing fees for inhouse counsel would provide a windfall for [the opposing party].) (quoting Garfield Bank v. Folb, 25 Cal.App.4th 1804, 1809, 31 Cal.Rptr.2d 239 (1994)). Furthermore, in Drexler the Court approved a lodestar fee calculation based on the hours spent even though in-house counsel did not keep contemporaneous daily billing records; a reconstruction of time spent was acceptable. See Drexler, 22 Cal.4th at 1096 n. 4. With these points in mind, the California Supreme Court rejected the argument that a better method of determining the value of in-house counsels time was a so-called cost-plus approach, based on a precise calculation of the actual salary, costs, and overhead of in-house counsel. Id. at 109697 (noting, the cost-plus approach, in addition to being cumbersome, intrusive, and costly to apply, may distort the incentives for settlement and reward inefficiency.) Thus, in conclusion the Court explained we conclude that the lodestar method, as applied to the calculation of attorney fees for inhouse counsel is presumably reasonable, although in exceptional circumstances, the trial court is not precluded from using other methodologies.) (emphasis added). Here, applying the lodestar method to the time spent by in-house counsel results in a sum of $177,930 for the reasonable cost of defending the California litigation. The table shown below thus summarizes the compensatory damages Xcentric seeks here:

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Description Outside Litigation Fees Litigation Costs In-house Counsel Fees Subtotal Less Previously Taxed Costs Total Compensatory Damages 5

Amount $91,993.00 $6,276.46 $177,930.00 $276,199.46 ($138.68) $276,060.78

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

c. Xcentric Is Entitled To Punitive Damages In addition to compensatory damages, punitive damages are also available in a malicious prosecution action; Malice proved indirectly through inference from want of probable cause is sufficient proof of malice in fact to justify an award of punitive damages. To establish malice for both liability and punitive damages, personal hostility or ill will need not be shown. The absence of an honest and sincere belief in the validity of the original proceeding is sufficient. 6A Cal. Jur. 3d Assault and Other Willful Torts 403 (emphasis added) (citing Bertero, 13 Cal. 3d at 67, 118 Cal. Rptr. at 201, 529 P.2d at 625); see also Burke v. Watts 188 Cal. 118, 126, 204 P. 578 (1922); Jensen v. Leonard 82 Cal.App.2d 340, 351, 186 P.2d 206 (1947). Here, Xcentrics Complaint alleges in detail how AEI and its attorney, Mr. Blackert, commenced litigation founded upon a set of highly inflammatory and largely gratuitous allegations (accusing Xcentric of extortion and a shakedown) even though they knew these allegations were totally false. These allegations do not merely establish the absence of an honest and sincere belief in the validity of the original proceeding ...; they show a deliberate, intentional, and highly malicious scheme to abuse the power of the judicial system to harass, coerce and hopefully destroy Xcentric; This flagrant abuse of the judicial process is precisely the type of tortious conduct that an award of exemplary damages is designed to deter. Bertero, 13 Cal. 3d at 67, 118 Cal. Rptr. at 200 (approving $625,000 punitive damage award where the defendant knowingly fabricated claims in order to coerce [plainitff] to settle or abandon a legitimate claim.) In light of the extreme and highly offensive nature of the Defendants conduct in this case, Xcentric requests an award of punitive damages in the amount of $500,000. Such amount is less than twice the amount of its compensatory damages ($275,178.00) and is therefore well-within the range of constitutionally permissible ratios for compensatory-vs.-punitive awards. See Sierra Club Found. v. Graham, 72 Cal.App.4th 1135 (1st Dist. 1999) (affirming punitive damage award of $2,017,914.21 where such amount was equal to three times compensatory damages in malicious prosecution action). 6

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

d. Additional Comments Re: Punitive Damages Although punitive damages awards greater than the amount requested here have been affirmed in other malicious prosecution cases, Xcentric nevertheless acknowledges that punitive damages should not be awarded lightly or without an appropriate factual basis. To help the Court understand why a significant award should be made here, the following additional comments are offered. As the Court is aware, a federal law known as the Communications Decency Act, 47 U.S.C. 230, provides absolute immunity to website operators like Xcentric from most types of civil tort claims arising from material posted by third parties. See, e.g., Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2011 WL 2469822 (C.D.Cal. 2011) (finding Xcentric entitled to immunity under the CDA). As noted in Xcentrics

First Amended Complaint, the CDA been both widely praised and passionately criticized; In addition to frequent praise and nearly unanimous judicial affirmation, the CDA has also drawn substantial and widespread commentary and passionate criticism from those who disagree with or dislike the law or the results which it sometimes requires. FAC (Doc. #55) 15. Indeed, other judges in this district have noted the ethical conflict which sometimes results from a literal application of the CDA; Unless Congress amends the statute, it is legally (although perhaps not ethically) beside the point whether defendants refuse to remove the material, or how they might use it to their advantage. Global Royalties, Ltd v. Xcentric Ventures, LLC, 544 F.Supp.2d 929, 933 (D.Ariz. 2008). These same concerns have been shared by courts in other cases; The prospect of blanket immunity for those who intentionally redistribute defamatory statements on the Internet has disturbing implications. Barrett v. Rosenthal, 40 Cal.4th 33, 6263, 146, P.3d 510, 529 (Cal. 2006); see also Giordano v. Romeo, 76 So.3d 1100, 1101 (Fla. 3d Dist. 2011) (describing Xcentrics business practices as appalling but affirming rule that the CDA provides absolute immunity to interactive computer services like Xcentric.) These cases make two points very clear. First, Xcentric is entitled to absolute immunity under the CDA as long as the material at issue was submitted by a third party. 7

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

Second, people affected by complaints posted on Xcentrics website (as AEI was) understand this immunity and have concluded that filing a normal lawsuiti.e., a suit alleging that Xcentric is liable for publishing material submitted by a third partyis not a viable solution. Aware of this fact but unwilling to accept the CDAs policy, opponents of the law have resorted to drastic and unlawful methods such as those used by the principals of AEI; fabricating a completely untrue story of being extorted by Xcentrics manager, Ed Magedson. Indeed, this plan was no accident; it was based on a suggestion from an attorney named Sarah Bird who wrote a online instructional guide (see http://www.seomoz.org/blog/the-anatomy-of-a-ripoff-report-lawsuit) which

expressly encouraged readers to do exactly what AEI didsue Xcentric using RICO/extortion theories in an attempt to avoid the CDA. In short, what happened here is not in disputeAEIs principal wanted to remove several negative complaints about AEI from the Ripoff Report website, but he knew that Xcentric was immune from liability based on the CDA. He found this result

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unacceptable, so he, his wife, and his then in-house counsel (Mr. Blackert) formulated a planthey would falsely accuse Xcentric of, inter alia, racketeering and extortion, and they would do so based on an alleged verbal threat which he would claim took place during a phone call with Mr. Magedson. Because these events would typically raise disputed issues of fact which could only be resolved at trial, AEIs principals and Mr. Blackert assumed that they could either force Xcentric to alter its non-removal policy simply in order to avoid the cost and risk of a trial, or they could hopefully convince a jury to believe their version of events, potentially leading to a financially devastating judgment against Xcentric. This is the very sine qua non of a malicious prosecution; The judicial process is adversely affected by a malicious prosecuted cause not only by the clogging of already crowded dockets, but by the unscrupulous use of the courts by individuals . . . as instruments with which to maliciously injure their fellow men. Bertero, 13 Cal.3d at 51, 529 P.2d at 614 (quoting Teesdale v. Liebschwager, 42 S.D. 323, 325, 174 N.W. 620, 621 (1919)). Defendants 8

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scheme was deliberate and malicious to such a degree that a significant award of punitive damages is appropriate in order to deter others from attempting a similar attack; we find that defendants conduct consisted of filing fabricated claims in order to coerce [plaintiff] to settle or abandon a legitimate claim. This flagrant abuse of the judicial process is precisely the type of tortious conduct that an award of exemplary damages is designed to deter. Bertero, 13 Cal.3d at 65, 529 P.2d at 624, 118 Cal.Rptr. at 200. In sum, the fact that AEI and Mr. Blackert disagreed with the CDA did not justify their attempt to end-run around the law with a fabricated story of attempted extortion. This plan represented a manifest abuse of the civil process which caused severe economic damage to Xcentric. As such, an award of punitive damages is appropriate here. II. CONCLUSION

For the reasons stated above, Xcentric is entitled a default judgment against Defendants DANIEL F. BLACKERT and ASIA ECONOMIC INSTITUTE, LLC which Xcentric requests to be made in the following amounts: Description Outside Litigation Fees Litigation Costs In-house Counsel Fees Subtotal Less Previously Taxed Costs Total Compensatory Damages Punitive Damages Total Judgment DATED July 20, 2012. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorneys for Plaintiff Amount $91,993.00 $6,276.46 $177,930.00 $276,199.46 ($138.68) $276,060.78 $500,000.00 $776,060.78

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CERTIFICATE OF SERVICE

I hereby certify that on July 20, 2012 I electronically transmitted the attached document to the Clerks Office using the CM/ECF System for filing, and for transmittal of a Notice of Electronic Filing to the following: John S. Craiger, Esq. David E. Funkhouser III, Esq. Quarles & Brady LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 Attorneys for Defendant Lisa J. Borodkin Raymond Mobrez Iliana Llaneras PO BOX 3663 Santa Monica, CA 90408 Defendants Pro Se And a courtesy copy of the foregoing delivered to: HONORABLE G. MURRAY SNOW United States District Court Sandra Day OConnor U.S. Courthouse, Suite 622 401 West Washington Street, SPC 80 Phoenix, AZ 85003-215

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/s/David S. Gingras

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