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Quarles & Brady LLP

Firm State Bar No. 00443100 Renaissance One, Two North Central Ave. Phoenix, AZ 85004-2391
TELEPHONE 602.229.5200

John S. Craiger (#021731) John.Craiger@quarles.com David E. Funkhouser III (#022449) David.Funkhouser@quarles.com Attorneys for Defendant Lisa Jean Borodkin IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA XCENTRIC VENTURES, L.L.C., Plaintiff, v. No. 2:11-CV-01426-PHX-GMS DEFENDANT LISA JEAN BORODKIN'S MOTION UNDER FEDERAL RULE OF CIVIL PROCEDURE 12(f) TO STRIKE PARAGRAPHS 2, 42, 44, 50 AND 51 OF THE VERIFIED COMPLAINT

LISA JEAN BORODKIN and JOHN DOE BORODKIN, husband and wife; RAMOND MOBREZ and ILIANA LLANERAS, husband and wife; DANIEL BLACKERT and JANE DOE BLACKERT, husband and (Assigned to the Honorable G. Murray wife; ASIA ECONOMIC INSTITUTE, LLC, a California limited liability company, Snow) DOES 1-10, inclusive, (Oral Argument Requested) Defendants.

Defendant LISA JEAN BORODKIN hereby moves pursuant to Federal Rules of Civil Procedure 1, 8(a) and 12(f) to strike paragraphs 2, 42, 44, 50, and 51 of the Verified Complaint (Complaint) on the grounds that they are scandalous, impertinent, and prejudicial. This Motion is based on the Memorandum of Points and Authorities filed and served herewith, and upon the papers, records and pleadings on file herein, and specifically without waiving other defenses under Federal Rule of Civil Procedure 12, motions for which are filed concurrently with this Motion.

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MEMORANDUM OF POINTS AND AUTHORITIES PRELIMINARY STATEMENT Defendant Lisa Jean Borodkin ("Ms. Borodkin) brings this motion pursuant to Federal Rules of Civil Procedure 1, 8(a)1 and 12(f) to strike paragraphs 2, 42, 44, 50 and 51 of the Verified Complaint (Complaint) filed by Plaintiff Xcentric Ventures, L.L.C. (Xcentric). Generally, this is styled as an action for malicious prosecution arising out of civil litigation in the Central District of California (the California Action). See Doc. 20. Paragraphs 2, 42, 44, 50 and 51 contain unsubstantiated and prejudicial references to criminal conduct and violations of California Rules of Professional Conduct allegedly committed by the defendants, two of whom are attorneys. These specific accusations of criminal and ethical violations are based on nothing more than what Plaintiffs attorney, David Gingras, claims is a reasonable inference from the disputed facts at issue in this action. Under the circumstances, inclusion of such extreme and personal attacks on the character and reputation of defendants, prior to adjudication of Xcentrics allegations, is impertinent, scandalous and prejudicial. Accordingly, this motion should be granted. II. SUMMARY OF RELEVANT FACTS A. References to Criminal Conduct Are Scandalous, Impertinent and Prejudicial.

Paragraphs 2, 42, 44, 50 and 51 of the Complaint allege that the plaintiffs in the California Action (Defendants Raymond Mobrez and Iliana Llaneras) and their counsel A complaint having the factual elements of a cause of action present but scattered throughout the Complaint and not organized into a short and plain statement of the claim may be dismissed for failure to satisfy Rule 8(a) of the Federal Rules of Civil Procedure. See Ortega v. Arpaio, 2006 U.S. Dist. LEXIS 59018 at *7 (D. Ariz. Aug. 15, 2006); McHenry v. Renne, 84 F.3d 1172 (9th Cir. 1996).
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(Defendant Daniel F. Blackert and Ms. Borodkin) committed the crimes of perjury, subornation of perjury and false swearing: . . . Defendants engaged in a wide variety of unlawful, criminal, tortious, and unethical conduct including, but not limited to: perjury in violation of 18 U.S.C. 1621, subornation of perjury in violation of 18 U.S.C. 1622, false swearing in violation of 18 U.S.C. 1623[.] (Compl. 2) (emphasis in original). . . . Defendants MOBREZ and LLANERAS each committed perjury when they testified that Magedson demanded $5,000 from MOBREZ in a telephone conversation[.] (Compl. 42) This [May 11, 2010] letter reiterated that Defendant MOBREZ and LLANERAS had committed perjury[.] (Compl. 44) . . . Defendant further perjured himself by testifying, for the first time, In addition, there were a number of incoming calls to me from Ripoff Report. (Compl. 50) . . . BORODKIN and BLACKERT intentionally suborned perjury from MOBREZ[.] (Compl. 51)

None of the Defendants has ever been prosecuted for or convicted of the crimes of perjury, subornation of perjury, or false swearing. B. References to Violations of California Rules of Professional Conduct Are Scandalous, Impertinent and Prejudicial.

Paragraph 2 of the Complaint alleges that Defendants (two of whom are attorneys) committed various violations of the California ethical rules for attorneys: . . . multiple/repeated violations of the California Rules of Professional Conduct including but not limited to: Rule 3-200 (prohibiting a lawyer from bringing an action or asserting any position in litigation without probable cause and for the purpose of harassing or maliciously injuring any person); Rule 3-210 (prohibiting a lawyer from advising a client to violate the law); and Rule 5-200(B) (prohibiting a lawyer from misleading a court by making a false statement of fact). (Compl. 2)

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Ms. Borodkin does not have any bar record of disciplinary action, for these allegations or otherwise. III. LEGAL ARGUMENT. A. Motions Under Rule 12(f).

Rule 12(f) of the Federal Rules of Civil Procedure provides: (f) Motion to Strike. The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act: (1) on its own; or (2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading. See Fed. Rule. Civ. Proc. 12(f). The function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial. See Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983); Torres v. Goddard, 2008 U.S. Dist. LEXIS 35291 at *3 (D. Ariz. Apr. 22, 2008). This Court has inherent authority to strike from any pleading any redundant, immaterial, impertinent or scandalous matter. See Apolinar v. Baum, 2008 U.S. Dist. LEXIS 113273 at *17 (D. Ariz. June 4, 2008). Such matter includes any allegations that unnecessarily or irrelevantly reflect on the moral character of an individual, do not contribute to the substantive claims, or state anything in repulsive language that detracts from the dignity of the court. See id. at *17-18; Vesecky v. Matthews (Mill Towne Center) Real Estate, LLC, 2010 U.S. Dist. LEXIS 24928 at *4 (D. Ariz. Mar. 2, 2010). A matter is impertinent if it consists of statements that do not pertain and are not necessary to the issues in question. See Torres v. Goddard, 2008 U.S. Dist. LEXIS 35291 at *3 (D. Ariz. Apr. 22, 2008). The decision whether to strike material as scandalous is within the discretion of the district court. See Talbot v. Robert Matthews Distrib. Co., 961 F.2d 654, 664-665 (7th Cir. Ill. 1992) (striking allegation that defendants conspired to

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cause fatal salmonella outbreak); Alvarado-Morales v. Digital Equipment Corp., 843 F.2d 613, 618 (1st Cir. P.R. 1988). Improper legal terms should be stricken from pleadings. See Clark v. Goodwill Indus. of Hawaii, 2009 U.S. Dist. LEXIS 86453, 30-31 (D. Haw. Sept. 21, 2009). B. Paragraphs 2, 42, 44, 50 and 51 Should Be Stricken from the Complaint. The allegations of perjury, suborning perjury and violations of California Rules of Professional Conduct in paragraphs 2, 42, 44 and 50 should be stricken under Rule 12(f). They are not necessary to the issues in this action. They would be unnecessarily burdensome to answer, and would unduly prejudice the Defendants. See Wailua Assocs. v. Aetna Cas. & Sur. Co., 183 F.R.D. 550, 556 (D. Haw. 1998) (striking reference to siege warfare as scandalous because plaintiff could communicate same idea in other words). The unfounded allegations of perjury and suborning perjury in the Complaint bear an unfortunate resemblance those in Nault's Auto. Sales, Inc. v. American Honda Motor Co., Acura Auto. Div., 148 F.R.D. 25, 29 (D.N.H. 1993) (Terms such as "perjury," "contempt," "liar," and "suborning of perjury" became almost routine in Nault's pleadings.). In Nault, as here, the defendant moved to strike, inter alia, allegations that the defendant had committed perjury, and that its counsel had suborned perjury and pressured a witness into signing an affidavit which it knew to contain false information. See id., 148 F.R.D. at 33. The Court struck the allegations of perjury, suborning perjury and other criminal conduct. In Nault, the Court specifically rejected Naults counsels claim to have acted in subjective good faith in alleging perjury, subornation of perjury and criminal conduct: That Nault's counsel are convinced in their own minds that the "facts" point exclusively to one reasonable conclusion (i.e., that Honda's counsel . . . suborned

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perjury," "committed perjury," and engaged in "criminal conduct") hardly establishes either the truth of those charges or even that those charges were objectively reasonable when made. . . . none of that justifies the unsubstantiated and extreme attacks on the personal integrity, ethics and character of defense counsel exhibited in the challenged pleadings. The tone, the language used, and the accusations themselves are unwarranted by the facts, either as they are presently known or as they were known to plaintiffs' counsel when the challenged pleadings were filed. See Nault, 148 F.R.D. at 34-35 (D.N.H. 1993). Without factual evidence, an attorneys subjective belief does not free him to indiscriminately bludgeon the professional reputations of other attorneys: [P]laintiffs' counsel . . . are of course free to believe whatever they choose to believe. They are not free to indiscriminately bludgeon the professional reputations of opposing counsel out of frustration, or in angry overreaction, or on mere suspicion alone. See id., 148 F.R.D. at 36. Exactly the same conviction exists solely in the mind of Xcentrics counsel, David Gingras. However convinced Xcentrics counsel may be that he will ultimately prevail on the merits of his claims, that conviction does not justify the accusations in the Complaint that Blackert and Ms. Borodkin committed the crimes of suborning perjury and violating Californias Rules of Professional Conduct. Such an inference is insufficient to justify scandalous allegations that irrelevantly reflect on the moral character of the defendants. See Vesecky, 2010 U.S. Dist. LEXIS 24928 at *4. If the evidence is consistent with two possible interpretations, scandalous allegations of perjury, subornation of perjury and criminal conduct against opposing counsel should be stricken from a pleading unless they are demonstrated beyond mere suspicion: When presented with evidence which is consistent with two possible and equally plausible, but inconsistent, interpretations of how opposing counsel have conducted themselves, professional courtesy and dignity militate in favor of adopting that which is consistent with ethical and professional conduct, at least until the contrary

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is demonstrated beyond mere suspicion. . . . In this instance, the Court finds there was and is no reasonable basis well grounded in fact to have warranted Nault's allegations of perjury and subornation of perjury in the first place, and certainly no basis for refusing to strike those allegations now. Those allegations are stricken. Nault's, 148 F.R.D. at 34. In this case, the evidence of Blackerts and Ms. Borodkins continuation of the California Action is subject to the alternate explanation that they believed the case had merit, and could be continued with the correction of any affected testimony. Xcentrics counsel recognized that possibility in a May 11, 2010 letter, attached to the Complaint in this action as Exhibit E ([I]t may be possible that you believe the case, or some part thereof, may still be salvageable based on the disclosure of new or different factual theories of some kind.). Therefore, these scandalous allegations supported only by mere suspicion should be stricken. Similarly, in Clark v. Goodwill Indus of Hawaii, the Court struck references to perjury in the complaint in that action: Each of Plaintiff's allegations of perjury are unsubstantiated . . . Perjury is a serious offense, and allegations of perjury are scandalous accusations that may result in prejudice against Defendants. . . . Improper use of legal terms should be stricken. Therefore, the Court strikes all allegations of perjury from paragraphs 27, 28, 31, 32, 33, 59, 62, 66, 67, and 82. Clark v. Goodwill Indus. of Hawaii, 2009 U.S. Dist. LEXIS 86453, 30-31 (D. Haw. Sept. 21, 2009). Likewise, improper use of the legal terms perjury, subornation of perjury false swearing and recitations of the California Rules of Professional Conduct should be stricken from the Complaint. C. There Has Been No Finding of Perjury to Support the Allegations.

Xcentric lacks evidence supporting the serious allegations of perjury, subornation of perjury and other crimes. Perjury requires not only proof beyond a reasonable doubt,

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but also consists of willfulness and must pertain to a material fact of the case. See Chein v. Shumsky, 373 F.3d 978, 983 (9th Cir. 2004). As no adjudication of perjury, was ever made, the allegations of Defendants committing perjury and suborning perjury are not only unsubstantiated but without objective factual basis. 1. There Has Been No Finding that Mobrez Acted Willfully

Specifically, there has been no finding of willfulness. To the contrary, Exhibit L attached to Xcentrics Complaint show that there is evidence that the alleged perjury was not willful. Mobrez stated in his corrected declaration, attached to the Complaint in this action as Exhibit L, that he had confused some of what was said in my telephone conversations with what was written in the e-mail correspondence. See Compl. Ex. L at 2:27-3:1. Mobrez stated that, I do specifically recall a telephone conversation with someone who mentioned five grand as the cost for joining the Corporate Advocacy Program . . . I do not know whether the speaker was Magedson or not. See Compl. Ex. L at 3:18-24. Mobrez also stated that part of his testimony was based on erroneous assumptions drawn from Mr. Magedsons prior declarations. See id. at 4:5-6. In the California Action, Magedson had filed declarations on March 22, 2010 and April 5, 2010, falsely claiming that Mobrez had threatened him in a telephone call. On May 11, 2010, Gingras filed a declaration for Magedson stating, in part: Having reviewed the recordings, I believe that I was mistaken when I testified in my affidavits that Mr. Mobrez made such threats towards me. I must have confused Mr. Mobrez with someone else. Upon reviewing the six recordings of the calls/voicemails from Mr. Mobrez which took place approximately a year ago, I realize now that I may not have accurately recalled the substance of those calls. These recordings do not contain any threats by Mr. Mobrez to locate me in Arizona and to the extent that my previous affidavits stated that such a threat occurred during those calls, I must have been

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mistaken. I believed that Mr. Mobrez was one of the people who threatened me because my email to Mr. Mobrez on July 24, 2009 said that I lived in California (which was not true). I concluded that I probably made that statement to Mr. Mobrez in response to a statement from him which threatened to find me in Arizona, or to have someone else do so[.]2. Thus, Xcentrics counsel is aware that both Defendant Mobrez and Magedson were both confused by Magedsons prior false statements. The confusion claimed by Mobrez falls far short of a finding of willfulness necessary for perjury, and does not support the serious allegations of perjury leveled by Xcentric in the Complaint. 2. The Alleged Perjury Was Not Material to The Cause of Action

Moreover, the substance of the alleged perjury was itself not material to the cause of action for RICO predicated on attempted extortion in the California Action. Exhibit A attached to Xcentrics Complaint show that the original complaint in the California Action alleged, in the claim for RICO predicated on attempted extortion, inter alia: 62. On or about May 5, 2009, Mobrez, on behalf of AEI, sent an email to Ripoffreport.com advising that it was posting false and defamatory information about the company. Magedson responded via email describing the websites policies and referring the Plaintiffs to the Ripoff Reports Corporate Advocacy, Business remediation and Customer Satisfaction Program. The program promised, among other things, to change[] the negative listings on search engines into a positive along with all the Reports on Rip-off Report. The pair later spoke by telephone, during which Magedson offered to enroll the Plaintiffs in the abovementioned program for an initial fee of $5,000 plus additional monthly monitoring fee. One week later, after Plaintiffs failed to fill out the appropriate paperwork, Magedson sent Mobrez an e-mail requesting he fill out the forms necessary to join the program. 63. Plaintiff rejected Defendants attempt to wrongfully collect and extort monies from their funds. Nevertheless, Defendants program amounts to attempted See AEI v. Xcentric, C.D. Cal No. 10-cv-1360 DN-31 (May 11, 2010), available at https://ecf.cacd.uscourts.gov/doc1/031110147370.

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extortion[.] 64. . . . The electronic and telephonic communication between Mobrez and Magedson constitute several predicate acts sufficient to establish a pattern of racketeering activity as that term is defined in 18. U.S.C. 1961(1) and (5). 65. . . . Defendants and individuals associate with them have perpetrated this scheme upon other entities. According to court records, other individuals have had similar offers made to them from Ed Magedson and Ripoff Report.com to address negative, false, misleading and defamatory posts. See Compl. Ex. A at 20-21 (emphasis added). It was undisputed in the California Action that Magedson sent Mobrez emails describing the Corporate Advocacy Program (CAP) as one that changes the negative listings on search engines into a positive along with all the Reports on the Ripoff Report. See Asia Econ. Inst. v. Xcentric Ventures, LLC, 2010 U.S. Dist. LEXIS 13337 at *20 (C.D. Cal. July 19, 2010). It was also undisputed that Xcentric charges $7,500 plus a monthly maintenance fee for CAP. See id. at *13. Moreover, the court in the California Case found that members of CAP receive preferential treatment, including that negative reports about CAP members are less prominent in internet searches.3 Here, Xcentric is alleging that Mobrez committed perjury by stating that he was asked on the telephone to join CAP for $5,000, as opposed to receiving an email describing the CAP, and, in fact the initial fee for CAP costs $7,500 rather than $5,000. These differences are not material to the AEI Parties claim for RICO predicated on a pattern of attempted extortion. As noted by the Court in the California Action, the AEI Parties only relied on threats made in writing and did not rely upon the California

See AEI v. Xcentric, C.D. Cal No. 10-cv-1360 DN-184, available https://ecf.cacd.uscourts.gov/doc1/031112261815 (May 4, 2011 Order) at 4.

at:

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attempted extortion statute that applies to threats not made in writing.4 Accordingly, the statements could not support a finding of perjury. In the California Action, Xcentric kept trying to revive the issue of the recordings that had been barred from evidence. Xcentrics counsel filed an unsuccessful Rule 11 motion grounded in part on the alleged perjury of the defendants which claimed, falsely, that: [I]t was proven that the individual Plaintiffs (Mr. Mobrez and Ms. Llaneras) committed perjury in this case by manufacturing and presenting sworn false testimony accusing Mr. Magedson of demanding $5,000 in order to make negative information disappear from the Rip-Off Report website.5 This Rule 11 motion was denied.6 Of course, no perjury was ever proven. Accordingly, these renewed allegations of perjury are scandalous and prejudicial. Accusing the Defendants in a new forum of perjury in order to again attempt to recover attorneys fees for immaterial statements, which were in fact corrected, is vexatious and unnecessarily multiplies the proceedings. IV. CONCLUSION For the foregoing reasons, paragraphs 2, 42, 44, 50 and 51 of the Verified Complaint should be stricken as impertinent, scandalous, and prejudicial.

See Asia Econ. Inst. v. Xcentric Ventures, LLC, 2010 U.S. Dist. LEXIS 13337 at *46 (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.) (emphasis added). 5 AEI v. Xcentric, AEI v. Xcentric, C.D. Cal No. 10-cv-1360 DN-135 (Sept. 3, 2010) at 2:12-15, available at https://ecf.cacd.uscourts.gov/doc1/031110823447 (emphasis added). 6 See AEI v. Xcentric, C.D. Cal No. 10-cv-1360 DN-184, available at: https://ecf.cacd.uscourts.gov/doc1/031112261815 at 14.

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RESPECTFULLY SUBMITTED this 31st day of October, 2011. QUARLES & BRADY LLP Renaissance One, Two North Central Avenue Phoenix, AZ 85004-2391 By /s/ David E. Funkhouser III John S. Craiger David E. Funkhouser III Attorneys for Lisa Jean Borodkin

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CERTIFICATE OF SERVICE I hereby certify that on October 31, 2011, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrant: David S. Gingras, Esq. (David@GingrasLaw.com) Attorneys for Plaintiff Hartwell Virginia Harris (hartwell@hartwellharris.com) Attorney for Defendants Mobrez, Llaneras and Asia Economic Institute LLC /s/ David E. Funkhouser III

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