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Xcentric Ventures, L.L.C. v. Borodkin

United States District Court, D. Arizona

November 8, 2012

XCENTRIC VENTURES, L.L.C., an Arizona limited liability company, Plaintiff,
v.
Lisa Jean BORODKIN, et al., Raymond Mobrez, Counterclaimant,
v.
Xcentric Ventures, L.L.C.; and Edward Magedson, Counterdefendants.

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David Scott Gingras, Gingras Law Office PLLC, Phoenix, AZ, for Plaintiff.

David Edward Funkhouser, III, John Spencer Craiger, Krystal Michelle Aspey, Quarles & Brady LLP, Phoenix, AZ, for Lisa Jean Borodkin, et al.

Raymond Mobrez, Santa Monica, CA, pro se.

David Scott Gingras, Gingras Law Office Pllc, Phoenix, AZ, for Counterdefendant.

ORDER

G. MURRAY SNOW, District Judge.

Pending before the Court is Defendant Lisa Borodkin's Motion to Dismiss (Doc. 102) Xcentric's Verified First Amended Complaint (Doc. 55). For the reasons stated below, the Motion is granted.[1]

FACTUAL BACKGROUND

Plaintiff Xcentric Ventures, LLC is an Arizona company that operates the website www. ripoffreport. com (" Ripoff Report" ). As its name suggests, Ripoff Report is an online forum where users can read and post messages about businesses that purportedly have " ripped off" consumers in some manner. ( Id. ¶ 2.) Xcentric claims never to have removed a post. ( Id. ¶¶ 13-17.) Edward Magedson is the manager of Xcentric and the editor of Ripoff Report. ( Id. ¶ 8.) Defendant Lisa Jean Borodkin is an attorney who represented Defendant Asia Economic Institute, LLC (" AEI" ), a California company that published current news and events online from the year 2000 until June 2009. ( Id. ¶¶ 3, 5.)

I. THE 2010 LAWSUIT

On January 27, 2010, AEI and its principals, Raymond Mobrez and Iliana Llaneras (the " AEI Plaintiffs" ), brought an action against Xcentric in state court in California (the " California Action" ). ( Id. ¶¶ 27-28.) The action was subsequently removed to the United States District Court for the Central District of California. ( Id. ) The initial complaint asserted twelve claims against Xcentric and Magedson, including RICO racketeering claims predicated on extortion and wire fraud. ( Id. ) These claims arose out of the AEI Plaintiffs' allegations that Xcentric deliberately manipulated the Ripoff Report so that negative posts about AEI rose to the top of internet searches, and then used its Corporate Advocacy Program (" CAP" ) to coerce AEI into paying Xcentric money in exchange for giving AEI more favorable treatment. See

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Asia Econ. Institute v. Xcentric Ventures, LLC, No. CV 10-1360 SVW (PJWx) 2010 WL 4977054 (C.D.Cal. July 19, 2010)( AEI I ).[2] The AEI Plaintiffs contended that the use and description of the CAP claimed amounted to extortion and wire fraud.

The AEI Plaintiffs were initially represented by Daniel Blackert, and from April 19, 2010, until the conclusion of the case, they were also represented by Borodkin. (Doc. ¶ 30.) At a hearing on April 19, 2010, the California District Court ordered the AEI Plaintiffs to produce " a declaration describing meetings with any representative of defendant regarding extortion[ ]" by May 3, 2010. ( Id., Ex. B.) At this time, the Court also bifurcated the action to allow consideration of the extortion claims first. ( Id. ) On May 3, Mobrez and Llaneras filed their declarations. ( Id. ¶ 32.) Mobrez stated that in the course of several telephone conversations, Magedson told him that the lawsuits were futile and that it would cost AEI $5,000 and a monthly fee to get the negative comments off of Ripoff Report. ( Id., Ex. C ¶¶ 6-14.) He allegedly told Mobrez that the only way to repair the damage was to enter the CAP program, and that " the more money a company made, the more they would be charged." ( Id. ) Llaneras listened in on the conversations between Mobrez and Magedson and affirmed in her declaration that the conversations occurred as Mobrez described. ( Id. Ex. D.)

At his May 7 deposition, Mobrez reaffirmed his testimony. (Doc. 55 ¶ 39.) Counsel for Xcentric then disclosed to Mobrez and Llaneras that all phone conversations between Magedson and Mobrez had been recorded and that the recording flatly contradicted the statements made in the Mobrez and Llaneras affidavits that Magedson asked for money in exchange for removing content. ( Id. ¶¶ 40-41.) Xcentric's counsel sent a letter to Borodkin and Blackert, in which he stated that Mobrez and Llaneras had perjured themselves, all the claims contained in the complaint were groundless, and that Borodkin and Blackert themselves would face liability for continuing to pursue baseless claims. ( Id., Ex. E.)

On May 20, 2010, Mobrez and Llaneras filed corrected affidavits. ( Id. ¶¶ 48-49, Exs. F, G.) The corrected affidavits did not describe any telephone conversations where Magedson threatened AEI or asked for money. ( Id., Ex. F.) Mobrez, however, maintained that he received telephone calls from someone at Xcentric who told him it would cost " five grand" to join the CAP. ( Id. ¶ 5.) He blamed a mix-up between telephone and email conversations for the incorrect statements in his previous declaration. ( Id. ¶ 6.) Borodkin and Blackert allegedly participated in preparing these declarations. (Doc. 55 ¶ 50.)

Borodkin continued to represent the AEI Plaintiffs in prosecuting their California case. ( Id. ¶ 52.) On July 9, 2010, one day before oral argument was to take place on Xcentric's summary judgment motion, Borodkin filed a Rule 56(f) motion to allow further discovery to take place. ( Id. ¶ 53.) On July 19, 2010, the District Court denied the Rule 56(f) motion, granted Xcentric's motion for summary judgment as to the RICO extortion claims, and dismissed the RICO wire fraud claims (which had not been pursued to that point) with leave to amend. ( Id. ¶ 56.) See AEI I, 2010 WL 4977054 at *26.

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Borodkin then filed a First Amended Complaint (" California FAC" ) for the AEI Plaintiffs on July 27, 2010. It asserted claims for wire fraud under RICO, RICO conspiracy, unfair business practices, defamation, intentional and negligent interference with prospective economic advantage, negligent interference with economic relations, deceit, and fraud. (Doc. 103-1, Ex. 8; Doc. 55 ¶ 57.) [3] The California FAC alleged that Xcentric caused the negative reviews to appear and disappear— depending on whether a company had entered the CAP— when an internet user entered the company's name into a search engine, and focused on the alleged discrepancy between how the CAP functions and Xcentric's statements on its website about never removing content. ( Id. ¶¶ 22-23, 25, 62-68, 138-69.) The California FAC also faulted Xcentric for concealing the allegedly exorbitant fees charged for participation in the CAP. ( Id. ¶¶ 22-24.) It asserted that these actions, taken together, constituted wire fraud and provided the predicate act for the RICO claim. ( Id. ¶¶ 22-23, 25, 62-68, 138-69.)

Xcentric again moved for summary judgment on September 27, 2010. (Doc. 55 ¶ 59.) Two hours before the summary judgment hearing on November 1, 2010, Borodkin filed another 56(f) motion on behalf of her clients, seeking a continuance of the hearing to allow for further discovery relating to James Rogers, who was previously a personal assistant to Magedson. ( Id. ¶ 60; Doc. 103-1, Ex. 11 at 199-219.) [4] In a declaration attached to the motion, Borodkin stated that she tried to arrange the deposition of Rogers with Xcentric's counsel, but was unable to come to an agreement. (Doc. 103-1, Ex. 11 at 217.) Subsequent efforts to get Rogers to come to California were unsuccessful. ( Id. ) Xcentric alleges that these statements made in the Rule 56(f) motion were false and misleading. (Doc. 55 ¶¶ 61-62.) The District Court vacated the hearing. ( Id. ¶ 63.)

At some point, the RICO wire fraud claims were dropped or dismissed. Asia Econ. Institute v. Xcentric Ventures, L.L.C., No. CV 10-01360 SVW (PJWx) 2011 WL 2469822 at *1 (C.D.Cal. May 4, 2011)( AEI II ).[5] On May 4, 2011, the District Court granted Xcentric's ...


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