34 - lisa's joinder in mtd re jx

7/29/2019 34 - Lisa's Joinder in MTD Re JX

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Quarles & Brady LLPFirm State Bar No. 00443100

Renaissance One, Two North Central Ave.Phoenix, AZ 85004-2391TELEPHONE 602.229.5200

John S. Craiger (#021731)[email protected] E. Funkhouser III (#022449)[email protected]

Attorneys for DefendantLisa Jean Borodkin

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

XCENTRIC VENTURES, LLC, an Arizonalimited liability company,

Plaintiff,

v.

LISA JEAN BORODKIN and JOHN DOEBORODKIN, husband and wife; RAMONDMOBREZ and ILIANA LLANERAS,husband and wife; DANIEL BLACKERTS

and JANE DOE BLACKERTS, husbandand wife; ASIA ECONOMIC INSTITUTE,LLC, a California limited liability company,DOES 1-10, inclusive,

Defendants.

No. 2:11-CV-01426-PHX-GMS

DEFENDANT LISA JEANBORODKIN'S JOINDER INMOTIONS OF RAYMONDMOBREZ, ILIANA LLANERAS,AND ASIA ECONOMICINSTITUTE, LLC TO DISMISSFOR LACK OF PERSONALJURISDICTION, AND TO DISMISSFOR IMPROPER VENUE; OR INTHE ALTERNATIVE TRANSFER

FOR IMPROPER VENUE (28 U.S.C. 1406(A)), OR IN THEALTERNATIVE TO TRANSFERFOR CONVENIENCE (28 U.S.C. 1404(a)

(Oral Argument Requested)

(Assigned to the HonorableG. Murray Snow)

Defendant LISA JEAN BORODKIN hereby joins in the Motions of DefendantsRaymond Mobrez, Iliana Llaneras, and Asia Economic Institute, L.L.C. (the AEI

Parties) (1) to Dismiss for Lack of Personal Jurisdiction pursuant to Federal Rule of Civil

Procedure 12(b)(2); and (2) to Dismiss pursuant to Federal Rule of Civil Procedure

12(b)(3) on the ground that the venue is improper; or in the alternative, to transfer this

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 1 of 18


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action to the Central District of California pursuant to 28 U.S.C. 1406(a), or in the

alternative to transfer for convenience pursuant to 28 U.S.C. 1404(a), and incorporates

such Motion and supporting papers by reference.

In addition, this Joinder in Motions is supported by the Memorandum of Points

and Authorities below, and 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 Notice of Joinder.

MEMORANDUM OF POINTS AND AUTHORITIES

I. THE ACTION SHOULD BE DISMISSED FOR LACK OF PERSONALJURISDICTION.

A. Introduction

Defendant Lisa Jean Borodkin (Ms. Borodkin) hereby joins in the motions of the

AEI Parties to dismiss this action for lack of personal jurisdiction.

All parties are in agreement that a federal court sitting in Arizona in a diversity

proceeding applies Arizona's long-arm statute to determine whether it has personal

jurisdiction over a defendant. See Ariz. R. Civ. P. 4(e)(2). Arizona's long-arm statute

grants Arizona courts jurisdiction coextensive with the limits of federal Due Process. See

Williams v. Lakeview Co., 199 Ariz. 1, 3 (Ariz. 2000).

The burden of proving jurisdiction falls on the plaintiff. See Butchers Union Local

No. 498, UnitedFood and Commercial Workers v. SDC Inv., Inc., 788 F.2d 535, 538 (9th

Cir. 1986). The issue of personal jurisdiction cannot be decided by applying any

mechanical test or "talismanic jurisdictional formulas. See Williams v. Lakeview Co., 199Ariz. 1, 3-4 (Ariz. 2000) [T]he facts of each case must [always] be weighed in

determining whether personal jurisdiction would comport with "fair play and substantial

justice."Burger King Corp. v. Rudzewicz, 471 U.S. 462, 485-486 (1985).



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Plaintiff Xcentric Ventures L.L.C. (Xcentric) concedes that it lacks general

personal jurisdiction over the defendants. See Doc. 261

at 4:2-4. The only question on this

motion is thus whether Xcentric has specific personal jurisdiction over Ms. Borodkin.

B. Ninth Circuit Standard for Specific Jurisdiction

In the Ninth Circuit, specific jurisdiction may be exercised over a nonresident

defendant only if the following three-part test is met: (1) the defendant purposefully

directs his activities to the forum or a resident thereof; or performs some act by which he

purposefully avails himself of the privilege of conducting activities in the forum, thereby

invoking the benefits and protections of its laws; (2) the claim arises out of or relates to

the defendants forum-related activities; and (3) the exercise of jurisdiction is reasonable

See Brayton PurcellLLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2010)

This test is sometimes called the Schwarzenegger test, after Schwarzenegger v. Fred

Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (This motion will use

Schwarzeneggertest to avoid confusion.) Xcentric does not dispute this standard. See

Doc. 26 at 4:19-16. The burden to demonstrate the first two elements rests squarely on

Plaintiffs shoulders. SeeBoschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008).

C. Xcentric Fails to Meet Its Burden under the Schwarzenegger Test ofShowing that Ms. Borodkin Purposefully Directed Tortious Activities

at the Forum.

The first prong under the Schwarzeneggertest for specific jurisdiction is satisfied

by either purposeful availment or purposeful direction, which . . . are, in fact, two distinc

concepts." See Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th

Cir. Cal. 2010). "A purposeful availment analysis is most often used in suits sounding in

contract. A purposeful direction analysis, on the other hand, is most often used in suits

1References to Doc __ are to documents filed in this action.



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sounding in tort." Id. Because this is a malicious prosecution action, a purposeful

direction analysis is the proper one.

The only allegation in the Complaint that Xcentric claims satisfies the purposeful

direction prong of the Ninth Circuit test for specific jurisdiction is Paragraph 9 of the

Complaint. See Doc. 26 at 7:6-10. Paragraph 9 alleges, in a wholly conclusory fashion:

9. Defendants actions were specifically intended to cause harm to Plaintiffwithin the State of Arizona and, in fact, Defendants actions had the intended effectof actually causing substantial harm to Plaintiff within the State of Arizona.Defendants, and each of them, are therefore properly subject to the personaljurisdiction within the State of Arizona.

See Compl., 9.2

This conclusory allegation does not satisfy Xcentrics burden of showing specific

personal jurisdiction. [T]he plaintiff cannot simply rest on the bare allegations of its

complaint if controverted by evidence incorporated into defendants motion. See

Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th

Cir. 2004); see also

Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280 (9th Cir. 1977). A

plaintiff cannot simply rest on the bare allegations of its complaint, but rather is

obligated to come forward with facts, by affidavit or otherwise, supporting personal

jurisdiction. Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784

787 (9th Cir. 1977).

Xcentric attempts to sidestep this problem by advancing an argument that

purposeful direction is met by: (1) the assertion that Xcentric incurred legal fees in the

State of Arizona sufficient to meet the jurisdictional amount, see Doc. 26 at 5:6-21; and(2) reliance on dicta inMagedson v. Whitney Information Network, Inc., 2009 WL 113477

(D. Ariz. 2009). (Doc. 26 at 6:11-7:10). Xcentric misstates Whitney, which is also

2References to Compl. are to the Complaint in this action.



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distinguishable on its facts, and the rule argued for by Xcentric is contrary to the Ninth

Circuits reasoning in cases such as Bancroft & Masters v. Augusta Nat'l, 223 F.3d 1082

(9th Cir. 2000),Brayton, 606 F.3d 1124, this Courts reasoning inXcentric Ventures, LLC

v. Bird, 683 F. Supp. 2d 1068, 1074 (D. Ariz. 2010) (Silver, C.J.) and the Arizona

Supreme Courts reasoning inBils v. Bils, 200 Ariz. 45 (Ariz. 2001).

1. Xcentric Fails to Show that Ms. Borodkin Expressly AimedHer Conduct at Arizona.

Xcentric cites Whitney to state that "'the purposeful direction or availment' standard

is satisfied where the Complaint alleges that the Defendants engaged in wrongful conduct

entirely outside of Arizona . . . which was targeted at Xcentric whom the Whitney

defendants knew was based in Arizona." See Doc. 26 at 6:11-15. Xcentrics argument

confuses the Schwarzeneggertest with the Caldereffects test.

In order to determine whether a defendants contacts satisfy the first part of the

Schwartzeneggertest (that is, purposeful direction), the Ninth Circuit uses the three-part

"Calder-effects" test, taken from the Supreme Court's decision in Calder v. Jones, 465

U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984). Under the Caldereffects test, to show

purposeful direction, "the defendant allegedly must have (1) committed an intentional

act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is

likely to be suffered in the forum state." SeeBrayton, 606 F.3d at 1128.

Contrary to Xcentrics argument, the Whitney court was not discussing the first

prong of the Schwarzeneggertest for specific jurisdiction (i.e., purposeful direction) in

the portion cited at Doc. 26 at 6. Rather, the Whitney court was analyzing express

aiming, the second part of the three-part Caldereffects test.

The Whitney court did not, as Xcentric incorrectly implies, suggest a rule that

purposeful direction is satisfied whenever the defendant knows the plaintiff is a resident

of the forum state. As the Ninth Circuit wrote in Bancroft, Caldercannot stand for the



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broad proposition that a foreign act with foreseeable effects in the forum state always

gives rise to specific jurisdiction. Bancroft & Masters v. Augusta Nat'l, 223 F.3d 1082

1087 (9th Cir. 2000). Rather, after citing that the Ninth Circuit has explained that express

aiming (not purposeful direction) occurs when the "defendant is alleged to have

engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a

resident of the forum state, the Whitney court stated, without discussing its reasons, that

Plaintiffs sufficiently allege that Defendants engaged in wrongful conduct targeted at

Plaintiffs, whom Defendants knew to be residents of Arizona. See Whitney, 2009 U.S

Dist. LEXIS 6400 at *7 (citing Bancroft, 223 F.3d at 1087 and Dole Food Co. v. Watts

303 F.3d 1104, 1111 (9th Cir. 2002)).

Nonetheless, the Ninth Circuit has said that there must be something more than

foreseeability that the effects would be felt in the forum state. See Bancroft, 223 F.3d at

1087. "Something more" is what the Supreme Court described as "express aiming" at the

forum state. See id.Bancrofts discussion of express aiming shows it is an intensely

fact-specific analysis, depending on the claims and the parties. What is express aiming at

an individual may not be express aiming at a corporation that does business world-wide.

SeeGordy v. Daily News, L.P., 95 F.3d 829, 833 (9th Cir. 1996) ("A corporation does no

suffer harm in a particular geographic location in the same sense that an individual does.)

A more complete analysis of the express aiming prong of the Caldereffects test

was discussed by this Court inXcentric Ventures, LLC v. Bird, 683 F. Supp. 2d at 1074

appeal dismissed, 10-15460 (9th Cir. Sept. 7, 2010). In Bird, Xcentric unsuccessfully



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attempted to assert personal jurisdiction over Washington-based blogger, Sarah Bird.3

Chief Judge Roslyn Silver declined to find that the express aiming prong of the

Caldereffects test is met whenever a defendant commits intentional acts with knowledge

of the defendants presence in the forum. Chief Judge Silver discussed the underlying

facts ofBancroft & Masters, 223 F.3d at 1087, and the 2010 case ofBrayton, 606 F.3d at

1129, to conclude that the Ninth Circuit has no mechanistic rule that knowledge of the

plaintiffs residence in Arizona is enough to meet express aiming under the Calder

effects test. Citing the majoritys opinion inBrayton, Chief Judge Silver wrote:

Assuming the dissent is correct that something more than knowledge of theresidence of the plaintiff is required for there to be express aiming at the Forum,such a requirement is satisfied here; the parties are competitors in the samebusiness so that the intentional infringement will advance the interests of thedefendant to the detriment of the Forum interests of the plaintiff. [Brayton, 575F.3d] at 988.

The majority thus expressly left open the question of whether knowledge of thevictim's residence combined with an intentional tort is sufficient to satisfy theexpress aiming/intentional targeting requirement, or if "something more" isrequired.

Xcentric Ventures, LLC v. Bird, 683 F. Supp. 2d at 1074 (emphasis added) (dismissing

action for lack of personal jurisdiction). This result has been followed in this District in

other intentional tort cases where this Court has declined to find the express aiming and

knowledge that harm is likely to be suffered in the forum state prongs of the Calder

effects test satisfied by merely an intentional act and knowledge of the plaintiffs Arizona

3 Incidentally, Xcentric has indicated that it will attempt to draw Ms. Bird into thislitigation as a witness, see Doc. 27 at 5, even though Bird has no apparent connection toXcentrics claims for malicious prosecution. The Complaint mentions the article thatXcentric sued Bird for writing, see Compl. 18-20, seemingly for no reason other than toclaim she is a witness.



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residence. See, e.g.,Mealer v. GMAC Mortg. LLC, 2010 U.S. Dist. LEXIS 121789 (D

Ariz. Nov. 16, 2010).

The Arizona Supreme Court also declined to find personal jurisdiction, in a

malicious prosecution case with similar jurisdictional facts as this one. In Bils v. Bils, one

brother, who resided in Arizona, sued his brother, a California resident, in Arizona for

malicious prosecution of a probate matter brought entirely in California. See Bils v. Bils

200 Ariz. 45, 46 (Ariz. 2001). The Arizona Supreme Court expressly rejected the

plaintiffs contention that the defendant -- who plainly knew that the plaintiff (his brother)

was an Arizona resident -- was subject to jurisdiction in Arizona under the Caldereffects

test, simply because the plaintiffs alleged harm was suffered in Arizona. See id. at 47

This was largely due to the plaintiffs active and willing participation in the California

probate matter. The court wrote:

Calder is a far cry from what we have here. Willy Bils was an active, willingparticipant in a will contest in California. . . . All of the defendants' underlyingconduct, i.e., creation of the pleadings, occurred in California and Oregon. Thesedefendants did not aim anything at Arizona. The only connection Arizona has to

this case is that the plaintiff is a resident of Arizona. . . . We reject the argument . . that an intentional tort that causes harm to an Arizona resident will always besufficient to confer in personam jurisdiction on the Arizona courts. Under theConstitution of the United States, that is where the analysis begins, but is not whereit ends.

Id. at 47-48 (Ariz. 2001) (Martone, J.)(emphasis added). In Bils v. Bils, the Arizona

Supreme Court held that Arizona did not have jurisdiction over the defendant or his

lawyer.Id. at 48.

Yahoo! Inc. v. La Ligue Contre Le Racisme, 433 F.3d 1199, 1207 (9th Cir. 2006),

does not support the exercise of personal jurisdiction in this case, as Xcentric argues. Doc

26 at 5:10-13. Yahoo! did not establish that personal jurisdiction could be found wherever

the defendant claimed to have suffered the jurisdictional amount of injury. It was



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clarifying that the brunt of the harm need not have been suffered in the forum state, but

that did not supplant the other requirements of the Caldereffects test. See 433 F.3d at

1207. Xcentrics claim that nothing more is necessary to satisfy the first prong of the

specific jurisdiction test,see Doc. 26 at 5:26-28, is simply wrong.

The Yahoo! court flatly declined to find that sending a cease and desist letter was

sufficient to confer personal jurisdiction (we do not believe that LICRA's letter is a

contact that would, if considered alone, justify the exercise of personal jurisdiction), see

id. at 1209, and similarly declined to find that serving process would confer personal

jurisdiction (We do not regard the service of documents . . . as contacts that by

themselves justify the exercise of personal jurisdiction), see id. Finally, it was not the

commencinglitigation in France in an effort to change Yahoo!s business practices that

the Ninth Circuit found to confer jurisdiction, but the fact that the French defendant had

obtained two court orders from a French court directing Yahoo! to take actions in

California, on threat of a substantial penalty. See id.

2. Xcentric Fails to Show that Ms. Borodkin Knew the Harm

Would Be Suffered Primarily in Arizona.

Xcentric relies almost exclusively on Whitney in opposing the AEI Parties

objections to personal jurisdiction. However, Whitney is distinguishable on its facts.

When applying the third prong of the Caldereffects test to the case before it, the

Whitney court found it sufficient that: Plaintiffs allege that Defendants knew the harm

they caused would be felt primarily in Arizona, in part because Plaintiffs filed motions to

dismiss for lack of personal jurisdiction in the Florida Action. See Whitney, 2009 U.S

Dist. LEXIS 6400, at *6-7 (emphasis added). The Whitney court stated no other grounds

for finding that defendants knew that harm was likely to be suffered in the forum state.

Xcentrics active, willing participation in the California Action is what makes this

case more likeBils v. Bils and distinguishable from Whitney. Xcentric, a frequent litigant



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is demonstrably capable of contesting jurisdiction and seeking transfer of cases to

Arizona, when it deems it advantageous. See, e.g., Hy Cite Corp. v

Badbusinessbureau.com, L.L.C., 297 F. Supp. 2d 1154, 1167 (W.D. Wis. 2004)

(Xcentrics predecessor); Whitney.

In the California Action, unlike Whitney and Hy Cite, Xcentric did not challenge

personal jurisdiction. Instead, Xcentric purposefully invoked the benefits and protections

of California law. Xcentric made two unsuccessful motions under Californias Anti-

SLAPP law, Code of Civil Procedure Section 425.16. Xcentric sought attorneys fees

under the California Anti-SLAPP statute on March 22, 2010.4

On September 27, 2010

Xcentric filed a second unsuccessful motion under the California Anti-SLAPP statute

also seeking the same attorneys fees it seeks here.5 Therefore, Xcentric cannot fairly

equate this case to Whitney. Defendants did not anticipate that harm incurred by

Xcentric would be primarily felt in Arizona. Xcentric was trying to recover its alleged

losses in the California Action itself. C.f.Whitney, 2009 U.S. Dist. LEXIS 6400, at *6-7.

Finally, Xcentrics citation toBils v. Nixon, Hargrave, Devans & Doyle,. 179 Ariz

523, 880 P.2d 743 (App. 1994), ironically supports dismissal or transfer of this action

The Arizona Supreme Court contrasted Bils v. Nixon with Bils. v. Bils, because the

plaintiffs right to privacy was invaded in Arizona inNixon:

We need not decide the propriety of the opinion in [Bils v. Nixon, HargraveDevans & Doyle,. 179 Ariz. 523, 880 P.2d 743 (App. 1994)]. . . [T]he defendantthere at least called an Arizona resident from out of state seeking information thatcould be used unlawfully against the plaintiff. There, arguably, the defendantinvaded the plaintiff's right to privacy in Arizona.

4 See AEI v. Xcentric, 10-cv-1360 (C.D.Cal. Mar. 22, 2010) Doc.9 (available athttps://ecf.cacd.uscourts.gov/doc1/03119842894 ).5

Id. (C.D. Cal. Sept. 27, 2010) Doc 154 (available athttps://ecf.cacd.uscourts.gov/doc1/031110952801 ).



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Bils v. Bils, 200 Ariz. at 47-48. For the exact same reason, even if Xcentric were able to

meet its burden of showing purposeful direction under the three-pronged Caldereffects

test (which it cannot), the exercise of personal jurisdiction in Arizona over these

California defendants would not be reasonable. As discussed below, an important

California state policy in protection of its citizens right to privacy has been invaded.

D. Xcentric Fails to Meet Its Burden of Showing that the Claim Arises Ou

of or Relates to Ms. Borodkins Forum-Related Activities.

The second part of the Schwartzeneggertest for specific jurisdiction requires that

the claim arises out of or relates to the defendants forum-related activities. See Brayton

PurcellLLP v. Recordon & Recordon, 606 F.3d 1124. Again, Xcentric relies on Whitneys

dicta, unsupported by reasoning, to support the second part of the Schwartzeneggertest

for specific jurisdiction. See Doc. 26 at 7-8. In Whitney, the court applied a but for

causal relationship to find a nexus between the underlying Florida lawsuit and Xcentrics

claims in Arizona, without discussion. See Whitney, 2009 U.S. Dist. LEXIS 6400 at *8

(But for the Florida Action, Plaintiffs would not have brought this lawsuit.).

Respectfully, such a literal but for analysis would render the second part of the

Schwartzeneggertest meaningless. If that were the standard, than in any case where the

defendant challenged specific jurisdiction, the plaintiff could meet its burden on the

second prong of the Schwartzeneggertest by stating that but for the alleged tort, the

plaintiff would not have sued the defendant in that forum.

It is instructive to distinguish the conduct in Bancroft & Masters from that here

Bancroftwas a declaratory judgment action to determine which party had the right to use

a certain domain name. See 223 F.3d at 1085. InBancroft, the express aiming prong of

the Caldereffects test was met because the defendant and plaintiff were competitors. The

defendant acted with the intention to wrongfully interfere with the plaintiffs business in

California when it sent a letter to a domain name registrar, intending to trigger a dispute



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resolution. See 223 F.3d at 1088. Because it was the letter to the domain registrar that

forced the plaintiff to choose between bringing the declaratory judgment suit and losing

the use of its website, the nexus between the defendants act of express aiming and the

events giving rise to the lawsuit was established. See Bancroft 223 F.3d at 1088.

The required nexus is lacking between any express aiming and the facts giving

rise to this Action. As discussed in greater detail in Ms. Borodkins motion for more

definite statement, Xcentric alleges nothing more specifically against Ms. Borodkin but

litigation tasks taken in the California Action. All of Xcentrics alleged damages are fees

and costs it voluntarily incurred in California, litigating the California Action. See Doc. 26

at 5:16. Therefore, Xcentric has failed to meet its burden on the second prong of the Ninth

Circuit test for specific jurisdiction.

E. Exercise of Personal Jurisdiction Would Be Unreasonable Because o

the Substantial Conflict With California State Substantive Law.

Even if Xcentric carried its burdens under the first and second prongs of the

Schwartzeneggertest, it would fail to show that personal jurisdiction in Arizona comports

with Due Process. The factors have been discussed extensively in the AEI Parties

motions, which are incorporated herein. However, it is necessary to correct the record on

the point regarding Extent of Conflict with California Sovereignty.

As discussed in the AEI Parties motions, many allegations in the Complaint rely

on the contents of recordings of telephone conversations that were made without the

consent of Defendant Raymond Mobrez, a California resident. See Compl. 41-43.

In opposing the Motion to Dismiss for Lack of Personal Jurisdiction, Xcentric

argued in discussing the factor, Extent of Conflict with California Sovereignty:

[R]egardless of the fact that Arizona is a one-party state and that therecordings were clearly lawful under Arizona law, even if this court were tosomehow apply California law, the recordings would be entirely admissible(assuming sufficient authentication).



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Doc. 27 at 7 (emphasis added).

In opposing the Motion to Dismiss or Transfer Venue, Xcentric argued:

Far from agreeing with Plaintiffs arguments that the recordings were illegal, theCalifornia district court specifically rejected that argument and determined that therecordings were not illegal; [T]he recordings at issue do not violate federal law. Insum, because the recordings at issue comply with federal law, they may beadmitted as evidence without regard to California Penal Code 632. AsiaEconomic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054, *1112(C.D. Cal. 2011). Because the recordings were not unlawful, they would beadmissible in any action whether in Arizona or California[.]

Doc. 27 at 9 (emphasis added).

These assertions are flatly contradicted by the reported opinion that Xcentric cites

In the California Action, Xcentric attempted unsuccessfully to offer the recordings in

support of Xcentrics first6 motion for summary judgment. See Asia Econ. Inst. v. Xcentric

Ventures, LLC, 2010 U.S. Dist. LEXIS 133370 at *29 (C.D. Cal. July 19, 2010).

Contrary to Xcentrics misrepresentation, the Court expressly found some of the

recordings that Defendants seek to admit were obtained in violation of California Penal

Code 632(a). See id. at *33 (emphasis added).

California Penal Code 632(d) prohibits the use of recordings obtained in violation

of that section from any proceeding other than one to enforce that section. See id. at *33

(citing Penal Code 632(d)). The Court in the California Action expressly found that the

Ninth Circuit requires that this rule of evidence must be applied in diversity cases:

The Ninth Circuit has concluded that California Penal Code 632 embodies astate substantive interest in the privacy of California citizens from exposure of their

confidential communications by third parties, and therefore is "properlycharacterized as substantive law within the meaning ofErie" and must be applied

6 Xcentric had moved for summary judgment on all claims. The Court found the motion"inappropriate given the Court's prior Order bifurcating the RICO/extortion claims." idat *26



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in diversity cases.

Id. at *34-35 fn.12 (citingFeldman v. Allstate Ins. Co., 332 F.3d 660, 667 (9th Cir. 2003)).

The Court specifically stated that California Penal Code 632(d) would not apply

to the motion before it only because it was directed to a claim brought under federal

substantive law. The Court expressly stated, The result would be different if this case

were proceeding on the ground of diversity jurisdiction. See id. at *34-35 fn. 12. In

other words, California state law would bar the recordings in a diversity action.

Moreover, the Court expressly found that 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 id. at *33 (citing Downing v

Abercrombie & Fitch, 265 F.3d 994, 1006 (9th Cir. 2001)).

Subject matter jurisdiction for the Complaint in this action is founded exclusively

on diversity. Compl. 10. Since the Court in the California Action found that California

law would apply, and California Penal Code 632(d) must be applied in diversity cases,

the recordings referred to in the Complaints allegations at Paragraphs 41 to 43 would not

be admissible in any California case asserting state law claims.

That the Court in the California Action expressly found a conflict with Californias

state sovereignty and that it undoubtedly would apply California law should end the

inquiry. Asserting jurisdiction and venue in Arizona when the very court that presided

over the California Action found that California law would exclude the recordings from

evidence would offend Due Process.

Moreover, a California forum would have greater familiarity with California law

that would apply to compulsory counterclaims under California Penal Code 637.2. That

section provides, in part, that any person damaged by a violation of Penal Code 632 may



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sue civilly to recover the greater of $5,000 or Three times the amount of actual damages,

if any, sustained by the plaintiff. See Cal Pen Code 637.2. That the California

legislature provided the extraordinary remedy of treble damages under California Penal

Code 637.2 demonstrates a strong state policy that must be given deference.

Undoubtedly, Xcentric, Ed Magedson, and others with knowledge of the recordings

would have to be named in such a compulsory counterclaim. Federal courts in California

have construed Penal Code 637.2 broadly, stating that it is not restricted to those who

physically made the recordings, but also against any person who aids, agrees with

employs, or conspires with any person or persons to unlawfully do, or permit, or cause

such recordings to be made. See Vera v. O'Keefe, 2011 U.S. Dist. LEXIS 54833 at *8 fn

2, 13 (S.D. Cal. May 23, 2011) (citing California Penal Code 631).

Therefore, the motion to dismiss for lack of personal jurisdiction should be granted.

II. IN THE ALTERNATIVE, THE COURT SHOULD DISMISS THIS ACTIONFOR IMPROPER VENUE OR IN THE ALTERNATIVE TRANSFER IT TO

THE CENTRAL DISTRICT OF CALIFORNIA.

For the foregoing reasons as well, this Court should dismiss this action as against

Ms. Borodkin for improper venue, or transfer it to the Central District of California.

It should also be noted that the very first witness from whom Xcentric seeks

discovery is the California State Bar. Xcentric claims that it cannot locate Defendant

Daniel Blackert and must subpoena the California Bars records. See Doc. 28.

Leaving aside the fact that Xcentric has not, and cannot, allege complete diversity

for purposes of subject matter jurisdiction if it does not know where one of the defendants

is, Xcentrics very first step in this case is to look to California for assistance in locating

one of the defendants. Xcentrics claims that it cannot assert personal jurisdiction over

Blackert without discovery from a California state entity, underscores the lack of contacts



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with Arizona and weighs in favor of dismissal or transfer to California.

III. THIS COURT SHOULD SANCTION XCENTRICS COUNSEL UNDER 28U.S.C. 1927 FOR VEXATIOUSLY MULTIPLYING THE PROCEEDINGS.

Section 1927 of 28 U.S.C. provides that "any attorney or other person admitted to

conduct cases in any court of the United States . . . who so multiplies the proceedings in

any case unreasonably and vexatiously may be required by the court to satisfy personally

the excess costs, expenses and attorneys' fees reasonably incurred because of such

conduct." See 28 U.S.C. 1927; Trulis v. Barton, 107 F.3d 685, 691-692 (9th Cir. 1995)

Unlike sanctions requests under Rule 11, sanctions requests under 28 U.S.C. 1927 need

not be made in a separate motion and need not comply with the 21-day safe harbor

provision under Rule 11. Only lawyers can be sanctioned under 28 U.S.C. 1927.

Where an attorney in bad faith attempts to relitigate an issue previously decided

the conduct supports a finding that the attorney vexatiously multiplied the proceedings

See Trulis v. Barton, 107 F.3d 685, 692 (9th Cir. 1995);In re Peoro, 793 F.2d 1048, 1051

(9th Cir. 1986)

On these particular facts, the conduct of Xcentrics counsel in arguing that the

California Action did not find that the recordings alleged at Paragraphs 41 to 43 of the

Complaint were made illegally, or that they would be admissible in an action in California

under diversity jurisdiction, can only be in subjective bad faith. The Court in the

California Action devoted nearly 15 pages of its order in Asia Econ. Inst. v. Xcentric

Ventures, LLC, 2010 U.S. Dist. LEXIS 133370 (C.D. Cal. July 19, 2010) to findings

regarding admissibility, conflict of laws and California state policy. See id. at *29-44Xcentrics counsel discussed that Order extensively in its Responses to these motions, See

Doc. 26 at 11- 1; Doc. 27 at 7. Xcentric also cited to that Order in the Complaint. See

Compl. 57. Moreover, Xcentrics counsel is a member of the California Bar. In light of

this, the statement, Because the recordings were not unlawful, they would be admissible



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in any action whether in Arizona or California, is not simply wrong, it is in subjective

bad faith.

There is no doubt that these arguments vexatiously multiplied these proceedings

The parties have been forced to engage in extensive briefing of these complex

jurisdictional issues, and correction of the out-of-context legal citations by Xcentrics

counsel. The Court has been burdened with analyzing, for a second time, issues that a

District Court in California already explained in detail. By filing in Arizona, making

specious arguments for jurisdiction, and citing to the order of the previous court out of

context, Xcentrics counsel is attempting to circumvent the previous order in California

Accordingly, Xcentrics counsel should be ordered to pay the excess attorneys fees

attributable to that conduct.

RESPECTFULLY SUBMITTED this 31st day of October, 2011.

QUARLES & BRADY LLPRenaissance One, Two North Central AvenuePhoenix, AZ 85004-2391

By /s/ David E. Funkhouser IIIJohn S. Craiger

David E. Funkhouser IIIAttorneys 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. ([email protected])Attorneys for Plaintiff

Hartwell Virginia Harris ([email protected])Attorney for Defendants Mobrez, Llaneras and AsiaEconomic Institute LLC

/s/ David E. Funkhouser III


34 - lisa's joinder in mtd re jx

Documents