united states district court southern district of … · case 1:07-cv-00222-sas-knf document 17...

10297-1/LAR/LAR/635039_v1

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------------x IGIA, INC., Plaintiff, v. XCENTRIC VENTURES, LLC., and ED MAGEDSON, Defendants.

MOTION TO VACATE DEFAULT JUDGMENT Case No.: 07-CV-222(SAS)

------------------------------------------------------------------x Pursuant to Fed.R.Civ.P. Rules 55(c) and 60(b), Defendant Xcentric

Ventures, LLC (“Xcentric”) respectfully requests that this court vacate the Default

Judgment entered against Xcentric by this Court on December 19, 2007. Plaintiff

failed to properly serve Xcentric, and as a result Xcentric had no notice of the action

and did not receive any documents related to the above-referenced action. Indeed,

Plaintiff just recently learned of the default. Plaintiff’s failure to properly serve

Xcentric requires this Court to vacate the Default Judgment entered against Xcentric,

to allow Xcentric and Ed Magedson to defend the spurious allegations made against

them on the merits.

I. INTRODUCTION

A. Background About Defendants.

Xcentric is an Arizona-based LLC which operates a website called

www.RipoffReport.com (“ROR” or “Rip-Off Report”). Ed Magedson is the

founder/Editor of Rip-Off Report and is the manager of Xcentric.

Case 1:07-cv-00222-SAS-KNF Document 17 Filed 02/26/2008 of 21

Rip-Off Report is a website which allows consumers to publish complaints

about companies who they feel have wronged them in some manner. In general,

anyone older than 14 years of age is allowed to sign up for a free ROR account; the

only requirement is a valid email address which is automatically confirmed before an

account can be used.

Once registered, a user who wants to post a complaint may click on a button

labeled “File a Report” which takes the user to a page with various blank fields for

them to enter data such as the name, address, and phone number of the subject

company, a title for their report, followed by the body of the report itself. Users also

“categorize” their report by selecting various adjectives from a long list which

contains benign terms such as “Home & Garden” or more pejorative phrases such as

“Corrupt Companies”.

Once the user is satisfied with their report, they click a button to submit the

report for publication. Xcentric charges nothing to its users to post or view reports.

As a general rule, it is undisputed that neither Xcentric nor Magedson

conducts any investigation into the truth or accuracy of reports before they are

published on the Rip-Off Report website. Once a report is published, the title and

contents are eventually indexed by search engines such as Google so that a person

who performs a search on Google for “XYZ Company” may see a link to one or

more complaints about XYZ Company on Rip-Off Report, if any such reports exist.

Companies who are the subjects of complaints on Rip-Off Report are allowed

to post a “rebuttal” explaining their side of the story. As with reports, Xcentric

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charges nothing to companies who wish to post rebuttals. As of January, 2008, the

Rip-Off Report site contains more than 300,000 original reports. When rebuttals are

included in the count, the site contains more than one million (1,000,000) unique

entries.

B. History of Case.

Xcentric was made aware of the above-captioned litigation only through an

Internet article that listed all lawsuits, past and present, against Xcentric. Utilizing

Pacer, Xcentric reviewed the docket report and have determined that the Complaint

was filed against Defendants in this Court on January 11, 2007. A Notice of Service

was filed, claiming that service was attempted on Xcentric on February 28, 2007 and

returned unexecuted. The Notice of Service, although not filed until November 19,

2007, also claims that service on Xcentric was completed on April 17, 2007 by

serving the “Corporation Commission of Arizona.”

II. LEGAL ANALYSIS

Rule 55(c) states “the court may set aside an entry of default for good cause,

and it may set aside a default judgment under Rule 60(b).” Fed.R.Civ.P. 55(c).

Plaintiff has obtained a default judgment here, and therefore Rule 60(b) must be

utilized to set aside the improperly granted default judgment.

Rule 60(b) governs motions for relief from a final judgment or order and

provides six independent grounds for relief. Those reasons allowing for relief from

a default judgment are:

(1) mistake, inadvertence, surprise, or excusable neglect;

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(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief.

Fed.R.Civ.P. 60. Xcentric is entitled to relief from the default judgment pursuant to

Rules 60(b)(1), (3), (4), and (6).

A motion to vacate a default judgment is “ ‘addressed to the sound discretion

of the district court.’ ” State Street Bank & Trust Co. v. Inversiones Errazuriz

Limitada, 374 F.3d 158, 166 (2d Cir.2004) (quoting SEC v. McNulty, 137 F.3d 732,

738 (2d Cir.1998)). However, the Second Circuit has expressed a strong “preference

for resolving disputes on the merits.” Powerserve Int'l, Inc. v. Lavi, 239 F.3d 508,

514 (2d Cir.2001) (citation omitted). A default judgment is “the most severe sanction

which the court may apply.” Cody v. Mello, 59 F.3d 13, 15 (2d Cir.1995) (citations

omitted). Accordingly, in ruling on a motion to vacate a default judgment, all

doubts must be resolved in favor of the party seeking relief from the judgment in

order to ensure that to the extent possible, disputes are resolved on their merits. See

Powerserve, 239 F.3d at 514.

A. The Judgment Is Void Pursuant To Rule 60(b)(4).

A judgment is void under Rule 60(b)(4) of the Federal Rules of Civil

Procedure “if the court that rendered it lacked jurisdiction of the subject matter, or of

the parties, or if it acted in a manner inconsistent with due process of law.” Texlon

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Corp. v. Mfrs. Hanover Commercial Corp., 596 F.2d 1092, 1099 (2d Cir.1979)

(quoting 11 Wright & Miller, Federal Practice and Procedure, § 2862 at 198 (1973));

see also Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 39 (2d Cir.1989). This

Court lacks personal jurisdiction over Xcentric because Xcentric is an Arizona

limited liability company that has no contacts with New York and because service

on Xcentric was improper. Valid service of process is an indispensable prerequisite

to the assertion of personal jurisdiction over a defendant. See Omni Capital Int'l,

Ltd. v. Rudolph Wolff & Co., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415

(1987).

Service of process must satisfy constitutional due process. See Ackermann v.

Levine, 788 F.2d 830, 838 (2d Cir.1986). Due process requires “notice reasonably

calculated ... to apprise interested parties of the pendency of the action.” Mullane v.

Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865

(1950). Plaintiff’s actions clearly were designed to avoid apprising Xcentric of the

pendency of its action, and to remove all due process to which Xcentric would be

entitled.

1. Xcentric Was Not Properly Served The Summons And Complaint.

5

The Federal Rules explain how service of a Summons and Complaint must be

done. For service on a corporation, such as Xcentric, the corporation must be served

“by delivering a copy of the summons and of the complaint to an officer, a managing

or general agent, or any other agent authorized by appointment or by law to receive

service of process and — if the agent is one authorized by statute and the statute so

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requires — by also mailing a copy of each to the defendant.” Fed.R.Civ.P.

4(h)(1)(B). Plaintiff also had the option to serve Xcentric “in the manner prescribed

by Rule 4(e)(1) for serving an individual.” Fed.R.Civ.P. 4(h)(1)(A). Rule 4(e)(1)

requires that service be made by “following state law for serving a summons in an

action brought in courts of general jurisdiction in the state where . . . service is

made.” Fed.R.Civ.P. 4(e)(1).

In the present action, Plaintiff was required to either make service upon an

officer, a managing or general agent, or any other agent authorized by appointment

or by law to receive service of process, with a copy by mail or, serve Xcentric

pursuant to Arizona state rules since Xcentric is in Arizona.

Arizona law requires that service on Xcentric must be made

by delivering a copy of the summons and of the pleading to a partner, an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the party on whose behalf the agent accepted or received service.

Ariz.R.Civ.P. Rule 4.1(k). If, and only if, Xcentric did “not have an officer or

agent” in Arizona upon whom legal service of process could be made,

service upon such domestic corporation shall be effected by depositing two copies of the summons and of the pleading being served in the office of the Corporation Commission, which shall be deemed personal service on such corporation.

Ariz.R.Civ.P. 4.1(l). Xcentric did have an agent in Arizona upon whom legal

service of process could be made. The statutory agent at the relevant time was G.

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Peter Busnack as was clearly reflected in the records of the Arizona Corporation

Commission available on-line. Mr. Busnack’s address of 8833 S. JB Road, Reevis

Mountain, AZ 85545 is a valid physical address within the state of Arizona. Plaintiff

simply chose not to serve him. Xcentric has been served on its statutory agent in

other litigations. (See Affidavits of Service, attached hereto as Exhibit “A”).

Plaintiff was also under an obligation to mail a copy of the Summons and

Complaint to Xcentric, if it “served” the Arizona Corporation Commission.

Fed.R.Civ.P. 4(h)(1)(b). No copy was ever received by Xcentric at any published

address at which it regularly receives mail.

It is suspicious that Plaintiff apparently waited seven months after allegedly

serving Xcentric before filing its Certificate of Service. (Doc. # 8). It is even more

suspect that Plaintiff failed to file its Certificate of Service until the Court dismissed

the case without prejudice for lack of service. (Doc. # 7). If Plaintiff supposedly

served Xcentric on April 17, 2007, Plaintiff should not have waited until November

19, 2007 to file its Certificate of Service.

2. Xcentric Was Not Properly Served Plaintiff’s Motion For Judgment of Default.

7

Rule 5(a)(1) requires that all pleadings be served on Xcentric, until default

was entered against it. Fed.R.Civ.P. 5(a)(1) and (2). Necessarily, this means that

Xcentric should have been served with Plaintiff’s Motion for Judgment of Default.

Id. Plaintiff’s Motion for Judgment of Default does not include a mailing certificate,

which is typically required to certify that Plaintiff provided a copy of the document

to the opposing party. Plaintiff did not even try to provide Xcentric with its Motion

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for Judgment of Default, despite being required to do so by law. Had Xcentric

received a copy of Plaintiff’s Motion, Xcentric unquestionably would have

responded immediately.

B. The Judgment Is Void Pursuant To Rule 60(b)(1) and 60(b)(6).

Rule 60(b)(1) provides, in pertinent part, that a court may relieve a party from

a final judgment for “mistake, inadvertence, surprise, or excusable neglect.”

Fed.R.Civ.P. 60(b)(1). Rule 60(b)(6) allows for a default judgment to be vacated for

“any other reason justifying relief from the operation of the judgment.”

Fed.R.Civ.P. 60(b)(6). Rule 60(b)(6) is the catch-all provision that allows a court to

grant relief from judgment for reasons that do not fall within one of the other

subsections. GMA Accessories, Inc. v. BOP LLC, 2007 WL 4563433, *3

(S.D.N.Y.,2007). The Second Circuit has often emphasized that:

[w]hen a district court decides a motion to vacate a default judgment pursuant to the provisions of Rule 60(b), the court's determination must be guided by three principal factors: “(1) whether the default was willful, (2) whether the defendant demonstrates the existence of a meritorious defense, and (3) whether, and to what extent, vacating the default will cause the nondefaulting party prejudice.”

State Street, 374 F.3d at 166-67 (citing Mc Nulty, 137 F.3d at 738); see also Am.

Alliance Ins. Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57, 59 (2d Cir.1996); Davis v.

Musler, 713 F.2d 907, 915 (2d Cir.1983).

1. Xcentric’s default was not willful.

8

“ ‘[T]he basic purpose of default judgment is to protect parties from undue

delay-harassment.’ ” Am. Alliance, 92 F.3d at 60 (quoting Baez v. S.S. Kresge Co.,

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518 F.2d 349, 350 (5th Cir.1975) (per curiam)). Willfulness in the context of a

judgment by default requires “something more than mere negligence,” such as

“egregious or deliberate conduct,” although “the degree of negligence in

precipitating a default is a relevant factor to be considered.” New York v. Green, 420

F.3d 99, 108 (2d Cir. 2005) (quoting Id. at 60, 61).

As explained above, prior to approximately January 22, 2008, Xcentric had

not received a copy of the Summons and Complaint. Indeed, Xcentric still has not

been served a copy of the Summons and Complaint, from either Plaintiff or the

Arizona Corporation Commission. Xcentric has filed this Motion as soon as

practical upon receiving knowledge of Plaintiff’s Complaint.

Xcentric’s failure to answer Plaintiff’s Complaint was not willful.

Importantly, Xcentric has a pattern of defending all lawsuits that are brought against

it. Had Xcentric received actual knowledge of Plaintiff’s Complaint, it

unquestionably would have filed a timely response. The “willfulness” here appears

to instead be on the part of Plaintiff, who deliberately chose not to direct any

correspondence to Xcentric and to take the most circuitous route to attempting

service. Xcentric has been involved in numerous relatively high-profile lawsuits

over the past five years, all with the same counsel. Further, a simple Google search

of “Xcentric” would have easily led Plaintiff directly to Xcentric’s counsel.

Common professional courtesy should have occurred here, with Plaintiff contacting

Xcentric’s counsel directly and apprising her about Plaintiff’s lawsuit. However,

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more than a year after filing its Complaint, Plaintiff still has not contacted Xcentric

or Xcentric’s counsel.

2. Xcentric possesses meritorious defenses.1

“ ‘In order to make a sufficient showing of a meritorious defense in

connection with a motion to vacate a default judgment, the defendant need not

establish his defense conclusively, but he must present evidence of facts that, if

proven at trial, would constitute a complete defense.’ ” State St. Bank & Trust Co. v.

Inversiones Errazuriz Limitada, 374 F.3d 158, 167 (2d Cir.2004) (quoting SEC v.

McNulty, 137 F.3d 732, 740 (2d Cir.1998)).

Plaintiff is asserting claims for violations of 18 U.S.C. § 1962(c) and (d),

premised on predicate acts of wire fraud and threatened extortion; defamation per se

of business reputation; and unfair competition. None of these claims will survive

when addressed on the merits.

i. No RICO violation occurred.

Counts 1 and 2 of Plaintiff’s Complaint are premised on violations of

Racketeer Influenced and Corrupt Organizations Act (“RICO”). Specifically,

Plaintiff has alleged “a scheme involving wire fraud, to extort money in connection

with the operation of Defendants’ sham consumer advocacy Internet website,

www.ripoffreport.com.” Plaintiff asserts the predicate act of “wire fraud” as the

basis for its claims. These allegations go beyond ridiculous; their substance is

10

1 Xcentric is only in possession of the Complaint as it was included in Plaintiff’s Motion for Default Judgment. The version of the Complaint attached to Plaintiff’s Motion did not include any exhibits. For an unknown reason, the Complaint is not available for download from PACER. Despite repeated phone calls to Plaintiff’s counsel, Xcentric has bee unable to obtain a full and complete copy of the Complaint, including its exhibits.

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clearly in violation of Rule 11 and cannot be substantiated under any set of facts

presented by Plaintiff.

Plaintiff claims that Xcentric “creat[ed] and solicit[ed] content injurious to

Plaintiff's business and offer[ed] to alter the content to portray Plaintiff in a good

light only if Plaintiff paid a $137,500 fee and $4,950 monthly retainer.” Complaint,

p. 8 at ¶ 45. Plaintiff also claims that “Defendants solicit and create defamatory

‘Rip-off Reports’ with negative, misleading false, and defamatory content and

defamatory titles and headings created by Defendants.” Complaint, p. 9 at ¶ 49.

These allegations, coupled with various other baseless statements made in the

Complaint, are what Plaintiff claims amount to “threatened extortion”. Plaintiff’s

claim for “wire fraud” apparently arises from the use of e-mail communication by

Xcentric.

To sustain a claim for violations of RICO, Plaintiff must first establish the

predicate act(s) upon which its claims are based. No set of facts exist whereby

Plaintiff can show either wire fraud or threatened extortion by Xcentric.

A civil RICO claim must allege “(1) conduct (2) of an enterprise (3) through a

pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479,

496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985). With respect to a RICO

complaint, Rule 9(b) requires that in all averments of fraud or mistake, the

circumstance constituting fraud or mistake shall be stated with particularity.

Edwards v. Marin Park, Inc., 356 F.3d 1058 (9th

Cir. 2004). The essential elements

of wire fraud are (1) the existence of a scheme to defraud; (2) the participation by the

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defendant in the particular scheme with the specific intent to defraud; and (3) the use

of the United States wires in furtherance of the fraudulent scheme. United States v.

Hannigan, 27 F.3d 890, 892 (3rd Cir. 1994); 18 U.S.C. §1341 (emphasis added).

Plaintiff has failed to explain with particularity the circumstances constituting the

fraud or mistake it is alleging to have occurred. In the explanation of its claim,

Plaintiff merely reiterates the allegations that it made for its claim of threatened

extortion, then adds that “posting complaints” and “sending e-mails” required

“transmitting writings by means of wire.” Plaintiff’s failure to provide even a single

required element of wire fraud ensures that this claim will be dismissed.

Plaintiff’s claim for a “pattern of racketeering activity” is premised on its

allegation that Defendants engaged in “threatened extortion”. Defendants are

unaware of any case law explaining that a claim of “threatened extortion” constitutes

a predicate act, and thus it is understandable why Plaintiff has made the leap to

attempt to classify this action as “wire fraud”. Even with attempting to stretch what

constitutes a predicate act, Plaintiff still cannot provide a basis for a claim of

“threatened extortion.”

“Extortion” is defined as “the obtaining of property from another, with his

consent, induced by wrongful use of actual or threatened force, violence, or fear.” 18

U.S.C. §1951(b)(2). Extortion consists of use of wrongful means to achieve a

wrongful objective. U.S. v. Clemente, 640 F.2d 1069 (2d Cir. 1981), certiorari

denied 102 S.Ct. 102, 454 U.S. 820, 70 L.Ed.2d 91. Necessarily in its definition,

“extortion” requires that Xcentric would have obtained property from Plaintiff.

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There is no allowance for an “attempted” predicate act giving rise to standing to

raise a RICO claim. See Stanson v. Calligan, 1993 WL 17014, *3 (9th Cir.1993) (If

no property has been relinquished by the plaintiff, “[i]t follows from this definition

that there can be no extortion, and hence no § 1951 violation, unless the perpetrator

obtains property from the victim”). Plaintiff admits in its Complaint that it has not

paid Xcentric any money; thus the likely reason for the use of the creative phrase

“threatened extortion”.

Plaintiff’s basis for the “threatened extortion” are its allegations that Xcentric

would “remedy[ ] the publication of false and defamatory complaints, which

Defendants allegedly created and solicited”, only if Plaintiff paid Xcentric a fee.

Not only does this explanation completely pervert the Corporate Advocacy Program,

it is flat-out wrong. “In the words of Justice Holmes, ‘As a general rule, even if

subject to some exceptions, what you may do in a certain event you may threaten to

do, that is, give warning of your intention to do in that event, and thus allow the

other person the chance of avoiding the consequences.’” Rothman v. Vedder Park

Management, 912 F.2d 315 (9th Cir. 1990) (holding that warning and notices that

rent would be raised did not constitute extortion as a predicate act under RICO).

Xcentric presented to Plaintiff nothing more than an offer to provide services

for compensation, which offer was rejected. Such a claim is not actionable under

RICO. See, e.g. Suirs v. New Metro Fed. Svgs. & Loan, 873 F.2d 1401, 1405 (11th

Cir. 1989) (holding that allegations of economic loss regarding a contract does not

constitute extortion). To prove the substantive act of attempted extortion, it is

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necessary to prove attempt to instill fear. Carbo v. U. S., 314 F.2d 718 (C.A.9 (Cal.)

1963), certiorari denied 84 S.Ct. 1625, 377 U.S. 953, 12 L.Ed.2d 498, rehearing

denied 84 S.Ct. 1902, 377 U.S. 1010, 12 L.Ed.2d 1058, certiorari denied 84 S.Ct.

1626, 377 U.S. 953, 12 L.Ed.2d 498, rehearing denied 84 S.Ct. 1903, 377 U.S.

1010, 12 L.Ed.2d 1058, certiorari denied 84 S.Ct. 1627, 377 U.S. 953, 12 L.Ed.2d

498.

Xcentric did not attempt to instill fear in Plaintiff through any of Xcentric’s

actions. Instead, Xcentric attempted to help Plaintiff remedy its horrible business

reputation by providing an outlet for resolving consumer complaints. Plaintiff

rejected this opportunity to ameliorate the damage claimed by its customers, and

instead chose to proceed with this frivolous lawsuit. Xcentric offered a business

service to Plaintiff; certainly, that cannot amount to extortion or even attempted

extortion.

ii. No claim of defamation per se of business reputation exists.2

“Under New York law, the elements of a defamation claim are ‘a false

statement, published without privilege or authorization to a third party, constituting

fault ... and it must either cause special harm or constitute a defamation per se.” ’

Peters v. Baldwin Union Free Sch. Dist., 320 F.3d 164, 169 (2d Cir.2003) (quoting

14

2 When jurisdiction is based upon diversity, a federal court applies the choice-of-law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). In an action for defamation, “New York assumes that the state of the plaintiff's domicile will usually have the most significant interest in the case and that its law should therefore govern.” Celle v. Filipino Reporter Enter. Inc., 209 F.3d 163, 175 (2d Cir.2000) (citation omitted). Plaintiff has asserted its place of business is New York; thus Defendants will presume, for the purpose of this Motion, that New York law applies to Plaintiff’s claims for defamation and unjust enrichment.

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15

Dillon v. City of New York, 704 N.Y.S.2d 1, 5 (N.Y.App.Div.1999)). For purposes

of defamation, “publication” is a term of art. Albert v. Loksen, 239 F.3d 256, 269

(2d Cir.2001) (quoting Ostrowe v. Lee, 175 N.E. 505 (N.Y.1931)). “A libelous

writing is published when it is read by a person other than the author and the one

defamed. Similarly, a slanderous statement is published and therefore actionable

when it is heard by some third party.” Barber v. Daly, 586 N.Y.S.2d 398, 400

(N.Y.App.Div.1992) (citations omitted). A defendant cannot be held liable for

defamation where it did not make or publish the statement at issue. See, Khan v. New

York Times Co., Inc., 710 N.Y.S.2d 41, 46 (N.Y.App.Div.2000) (“It is axiomatic that

a defendant cannot be held liable for a libelous statement that it did not write or

publish.”).

Xcentric did not author or create any “story” or “headline” about Plaintiff that

was posted on Rip-off Report.3 Xcentric cannot be treated as the publisher of any

content that it did not create. The Communications Decency Act (“CDA”), 47

U.S.C. § 230, which was passed by Congress with the intent to “promote unfettered

speech,” provides in relevant part that:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any

3 Plaintiff has alleged in its Complaint that Defendants “create fictional complaints themselves”. See Complaint p. 12 at ¶ 64. This allegation is pure fiction, and, more importantly, is contradicted by all evidence. Ed Magedson, as manager of Xcentric, has testified under oath in other cases, through deposition testimony and sworn affidavits, that neither he nor any individual affiliated with Xcentric has created any reports on Rip-off Report. If Xcentric’s Motion is granted, Xcentric will provide the Court with further sworn testimony that no individual affiliated with Xcentric created, or caused to be created, any report about Plaintiff posted on Rip-off Report. Plaintiff has also alleged that Defendants “create headings, report titles, and messages for the reports”. See Complaint p. 12 at ¶ 65. This allegation is also meritless. The author of the report is the one who creates, in its entirety, the title for the report and the content of the report.

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information provided by another information content provider.

47 U.S.C. § 230(c)(1) (emphasis added). Section 230 further provides that “[n]o

cause of action may be brought and no liability may be imposed under any State or

local law that is inconsistent with this section.” Green v. America Online, 318 F.3d

465, 470 (3rd Cir. 2003) (noting that the CDA, “‘precludes courts from entertaining

claims that would place a computer service provider in a publisher’s role,’ and

therefore bars ‘lawsuits seeking to hold a service provider liable for its exercise of a

publisher’s traditional editorial functions - such as deciding whether to publish,

withdraw, postpone, or alter content.’”).

16

An outstanding explanation of this law and its history is set forth in the

California Supreme Court’s recent opinion in Barrett v. Rosenthal, --- Cal.Rptr.3d --

--, 2006 WL 3346218 (Cal. Nov. 20, 2006). In fact, as the Barrett court recognized,

the CDA has been universally interpreted as providing immunity to interactive

websites for content created by a third party. See Barrett, 2006 WL 3346218, *18

note 18; (citing Blumenthal v. Drudge, 992 F.Supp. 44, 51 (D.D.C. 1998); Ben Ezra,

Weinstein, and Co., Inc. v. America Online, Inc., 206 F.3d 980, 986 (10th Cir. 2000);

Morrison v. America Online, Inc., 153 F.Supp.2d 930, 933–934 (N.D.Ind. 2001);

PatentWizard, Inc. v. Kinko’s, Inc. 163 F.Supp.2d 1069, 1071 (D.S.D. 2001); Green

v. America Online, 318 F.3d 465, 470-471 (3rd Cir. 2003); Carafano v.

Metrosplash.com, Inc., 339 F.3d 1119, 1123-1124 (9th Cir. 2003); Doe One v.

Oliver, 755 A.2d 1000, 1003-1004 (Conn.Super.Ct. 2000); Doe v. America Online,

Inc., 783 So.2d 1010, 1013-1017 (Fla. 2001); Schneider v. Amazon.com, Inc., 31

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P.3d 37, 40-42 (Wn.App. 2001); Barrett v. Fonorow, 799 N.E.2d 916, 923-925

(Ill.App.Ct. 2003); Donato v. Moldow, 865 A.2d 711, 720-727 (N.J.

Super.Ct.App.Div. 2005); Austin v. CrystalTech Web Hosting, 125 P.3d 389, 392-

394 (Ariz.App. 2005)).

Secondary authority has also explained that:

[The CDA’s] provisions set up a complete shield from a defamation suit for an online service provider, absent an affirmative showing that the service was the actual author of the defamatory content. Accordingly, a number of courts have ruled that the ISP was immune from liability for defamation where allegedly libelous statements were made available by third parties through an ISP or were posted by third parties on the server's billboards, as the ISP fell within the scope of 47 U.S.C.A. § 230.

17

Jay M. Zitter, J.D., Annotation—Liability of Internet Service Provider for Internet or

E–mail Defamation § 2, 84 A.L.R.5th 169 (2000) (emphasis added) (citing Pantazis,

Note, Zeran v America Online, Inc.: Insulating Internet Service Providers From

Defamation Liability, 34 Wake Forest L. Rev. 531 (1999)); see also Batzel v. Smith,

333 F.3d 1018, 1027–28 (9th Cir. 2003) (recognizing, “Making interactive computer

services and their users liable for the speech of third parties would severely restrict

the information available on the Internet. Section 230 therefore sought to prevent

lawsuits from shutting down websites and other services on the Internet.”) (quoting

Ben Ezra, Weinstein, & Co. v. America Online Inc., 206 F.3d 980, 983–84 (10th Cir.

2000). Since Xcentric cannot be treated as the publisher of content it did not create,

it cannot be held liable for the statements alleged as defamatory by Plaintiff. See 47

U.S.C. § 230(c)(1); Khan, 710 N.Y.S.2d at 46.

10297-1/LAR/LAR/635039_v1


iii. No claim for unfair competition exists.

Plaintiff’s cause of action for unfair competition is premised on Xcentric’s

role in the publication of allegedly false and defamatory statements on Rip-off

Report. As addressed above, Xcentric cannot be held liable as the publisher of

content provided by a third-party. 47 U.S.C. § 230(c)(1). The CDA applies to other

tort liability as well, not simply claims for defamation. Gucci America, Inc. v. Hall

& Associates, 135 F.Supp.2d 409, 415 (S.D.N.Y.,2001); see also Zeran v. America

Online, Inc., 129 F.3d 327 (4th Cir.1997); Blumenthal v. Drudge, 992 F.Supp. 44

(D.D.C.1998); Ben Ezra, Weinstein and Co. v. America Online, Inc., 206 F.3d 980

(10th Cir.2000), cert. denied, 531 U.S. 824, 121 S.Ct. 69, 148 L.Ed.2d 33, 69

U.S.L.W. 3001 (U.S. Oct. 2, 2000) (No. 99-2020); Doe v. America Online, Inc., 783

So.2d 1010 (2001). Xcentric is entitled to immunity under the CDA for Plaintiff’s

allegation of unfair competition as well.

3. Vacating the default will not prejudice Plaintiff.

Some delay is inevitable when a motion to vacate a default judgment is

granted; thus, “delay alone is not a sufficient basis for establishing prejudice.”

Davis, 713 F.2d at 916. Something more is needed. Green, 420 F.3d at 110. For

example, delay “may thwart plaintiff's recovery or remedy. It also may result in the

loss of evidence, create increased difficulties of discovery, or provide greater

opportunity for fraud and collusion.” 10A Charles A. Wright, et al., Fed. Practice &

Procedure: Civil § 2699, at 169 (3d ed.1998), cited in Davis, 713 F.2d at 916. None

of those factors exist here.

1810297-1/LAR/LAR/635039_v1


C. The Judgment Is Void Pursuant To Rule 60(b)(3).

Under Rule 60(b)(3), a district court may relieve a party from a final

judgment for “fraud.” Fed.R.Civ.P. 60(b)(3). In addition, Rule 60(b) allows a court

to set aside a judgment for fraud on the court. State Street Bank and Trust Co. v.

Inversiones Errazuriz Limitada, 374 F.3d 158, 176 (2d Cir.2004); see Campaniello

Imports, Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655, 661 (2d Cir.1997).

To prevail on a Rule 60(b)(3) motion, a movant “must show that the conduct

complained of prevented the moving party from fully and fairly presenting his case.”

Taylor v. Texgas Corp., 831 F.2d 255, 259 (11th Cir.1987) (citations and internal

quotation marks omitted); see also Stridiron v. Stridiron, 698 F.2d 204, 207 (3d

Cir.1983) (same); Rozier v. Ford Motor Co., 573 F.2d 1332, 1339 (5th Cir.1978)

(same). These same principles apply when a movant seeks to set aside a judgment

on the basis of fraud on the court. See Davenport Recycling Associates v. C.I.R., 220

F.3d 1255, 1262 (11th Cir.2000) (“ ‘Fraud on the court must involve an

unconscionable plan or scheme which is designed to improperly influence the court

in its decision,’ preventing the opposing party ‘from fully and fairly presenting his

case.’ ”) (quoting Abatti v. C.I.R., 859 F.2d 115, 118 (9th Cir.1988)); see also

Luttrell v. United States, 644 F.2d 1274, 1276 (9th Cir.1980); Keys v. Dunbar, 405

F.2d 955, 957-58 (9th Cir.1969) (per curiam).

Plaintiff has prevented Xcentric from fully and fairly presenting its case. As

addressed previously, Xcentric has been a party to litigation on numerous occasions.

Since 2003, Xcentric has had the same litigation counsel, whose name has appeared

1910297-1/LAR/LAR/635039_v1


on all pleadings. A simple Google search returns numerous results, all providing the

user with the name and contact information for counsel for Xcentric. Despite the

clear availability of information, Plaintiff failed to even notify Xcentric’s counsel.

Although not required to do so by law, Plaintiff’s choice clearly flies in the face of

typical common courtesy.

According to the Affidavit of Service filed by Plaintiff, service was attempted

on Xcentric’s statutory agent but could not be completed because the address “is not

a valid mailing or physical address according to the Roosevelt Post Office Official”.

See Doc. # 8. The Affidavit seems to indicate that Plaintiff did not actually attempt

service on Xcentric, but instead made a telephone call to the post office where he

believed Xcentric’s statutory agent to be located. Xcentric’s statutory agent’s

address is a valid physical address and Xcentric has received service of numerous

documents at that location.

Once Plaintiff was “unable” to serve Xcentric’s statutory agent, instead of

attempting to locate Xcentric’s well-known counsel, Plaintiff then served the

Arizona Corporation Commission. Plaintiff’s counsel never sent a copy of the

document to Plaintiff’s post office box which is published on the Rip-off Report

website. By serving the Arizona Corporation Commission, Plaintiff ensured that the

utmost delay would occur in getting the pertinent documents to Xcentric. This is

unacceptable, and was clearly done for the sole purpose of ensuring that Xcentric

would not receive the Summons or Complaint in a timely manner.

2010297-1/LAR/LAR/635039_v1


III. CONCLUSION

Based on the foregoing, and pursuant to Fed.R.Civ.P. Rules 55(c) and 60(b),

Xcentric Ventures, LLC respectfully requests that the Default Judgment entered

against Defendant Xcentric Ventures, LLC be vacated.

DATED this day of February, 2008.

JABURG & WILK, P.C. /s/Maria Crimi Speth Maria Crimi Speth Attorneys for Defendant Xcentric Ventures, LLC Maria Crimi Speth, #012574 JABURG & WILK, P.C. 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 Phone: (602) 248-1000 Fax: (602) 248-0522 Email: [email protected]

Certificate of Service

I hereby certify that on ___________, 2008, I electronically transmitted the attached document to the Clerk’s Office using the CM/ECF System for filing, and for transmittal of a Notice of Electronic Filing to the following CM/ECF registrants:

Richard M. Mortner

The Mortner Law Office, P.C. 16 East 40th Street, 12th Floor

New York, NY 10016

Attorneys for Plaintiff

/s/Maria Crimi Speth 2110297-1/LAR/LAR/635039_v1


mailto:[email protected]

EXHIBIT A

Case 1:07-cv-00222-SAS-KNF Document 17-2 Filed 02/26/2008 Page 1 of 6

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