Xcentric v. Lisa Borodkin - Proposed Second Amended Complaint | Complaint | Federal Rules Of Civil Procedure

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

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

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA

Xcentric Ventures, LLC, an Arizona limited liability company, Plaintiff, v. Lisa Jean Borodkin, et al., Defendants. Raymond Mobrez, Counterclaimant, v. Xcentric Ventures, LLC, and Edward Magedson, Counterdefendants.

Case No.: 11-CV-1426-GMS MOTION FOR LEAVE TO AMEND

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Pursuant to Fed. R. Civ. P. 15(a)(2), Plaintiff/Counterdefendant XCENTRIC VENTURES, LLC (“Plaintiff” or “Xcentric”) respectfully moves for leave to file the Proposed Second Amended Complaint (“SAC”) submitted herewith.
MOTION FOR LEAVE TO AMEND

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

When the facts of a case are lengthy and complex as they are here, drafting an appropriate Complaint can present a daunting “Goldilocks” problem. On the one hand, a Complaint may be too “cold”, and thus subject to dismissal under Rule 12(b)(6), if it fails to allege sufficient facts to state a plausible claim for relief. On the other hand, at the other end of the spectrum a Complaint may also be too “hot”, and thus equally subject to dismissal, when it contains more facts than necessary; “A complaint that is ‘argumentative, prolix, replete with redundancy ... [and] consists largely of immaterial background information’ is subject to dismissal.” Donahoe v. Arpaio, ___ F.Supp.2d ____, 2012 WL 1161580, *41 (D.Ariz. 2012) (quoting McHenry v. Renne, 84 F.3d 1172, 1177 (9th Cir. 1996)). The solution to the Goldilocks pleading problem is two-fold. First, rather than requiring “hyper-technical” drafting and demanding that the plaintiff recite and include every fact, every detail, and every document at issue, the modern construction of Rule 8 employs a far more lenient standard. The rule does not require a Complaint to set forth detailed facts, but rather just a “short and plain” statement of the claim sufficient to “nudge” a claim “across the line from conceivable to plausible.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1951 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). This is not a difficult test. Second, at the motion to dismiss stage of a case, courts must give the Complaint the benefit of the doubt by accepting its allegations as true and by drawing all reasonable inferences in favor of the plaintiff. See Didyoung v. Allstate Ins. Co., 2012 WL 1983779, *3 (D.Ariz. 2012) (explaining, “When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party.”) (quoting Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996)). This well-worn standard applies to malicious prosecution cases exactly as it does with any other type of claim. See Pochoda v. Arpaio, 2009 WL 1407543, *5 (D.Ariz. 2009) (denying Rule 12(b)(6) Motion to Dismiss in malicious prosecution action based on classic Rule 12 standards). 2
MOTION FOR LEAVE TO AMEND

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Taken together, these interpretations of Rule 8 require that the plaintiff be afforded significant deference during the early, pre-discovery stage of the case. See Addy v. State Farm Ins. Co., 2010 WL 1408886, *1 (D.Ariz. 2010) (noting, “A motion to dismiss for failure to state a claim is disfavored and rarely granted.”) (citing Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 248–49 (9th Cir. 1997)); Saunders v. Silva, 2009 WL 3756674 (D.Ariz. 2009) (noting, “‘Rule 12(b)(6) motions are viewed with disfavor,’” and ‘[d]ismissal without leave to amend is proper only in “extraordinary” cases.’”) (quoting Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003)). Here, although Xcentric contends that the facts set forth in its previous Complaint were sufficient to state a claim, it is not necessary to debate these points at any great length. This is so because all of the concerns which resulted in the prior dismissal can be resolved by merely allowing Xcentric to amend its Complaint in order to provide a clearer picture of the events giving rise to this action. To that end, a proposed Second Amended Complaint is submitted herewith in redline form. While leave to amend is generally within the district court’s sound discretion, as this Court has noted, “Rule 15’s policy of favoring amendments to pleadings should be applied with extreme liberality.” Stickler v. Arpaio, 2012 WL 3596514 (D.Ariz. 2012) (quoting Eldridge v. Block, 832 F.2d 1132, 1135 (9th Cir.1987). Moreover, the Ninth Circuit has “repeatedly held that ‘a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not be cured by the allegation of other facts.’” OSU Student Alliance v. Ray, --- F.3d ----, 2012 WL 5200341, *20 (9th Cir. 2012) (emphasis added) (quoting Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (observing, “in a line of cases stretching back nearly 50 years, we have held that in dismissing for failure to state a claim under Rule 12(b)(6), ‘a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.’”) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995) and compiling extensive authority). 3
MOTION FOR LEAVE TO AMEND

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

As reflected in the proposed Second Amended Complaint, there are voluminous additional facts not previously included in the prior Complaint which Xcentric contends are more than sufficient to demonstrate that its claims can survive scrutiny under Rule 12(b)(6). Xcentric notes that despite the length of the proposed Second Amended

Complaint, every effort has been made to prepare a pleading which is not too hot, nor too cold, and which strikes an appropriate balance between pleading too many facts at the risk of pleading too few. Indeed, were Xcentric to include every fact and every exhibit supporting its position, the amended pleading would be many orders of magnitude longer. For that reason, Xcentric respectfully requests leave to file the Second Amended Complaint submitted herewith. DATED December 10, 2012. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorney for Plaintiff/Counterdefendant Xcentric Ventures, LLC

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MOTION FOR LEAVE TO AMEND

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

CERTIFICATE OF SERVICE

I hereby certify that on December 10, 2012 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: John S. Craiger, Esq. David E. Funkhouser III, Esq. Krystal M. Aspey, Esq. Quarles & Brady LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 Attorney for Defendant Lisa J. Borodkin Raymond Mobrez Iliana Llaneras PO BOX 3663 Santa Monica, CA 90408 Defendants Pro Se And a courtesy copy of the foregoing delivered to: HONORABLE G. MURRAY SNOW United States District Court Sandra Day O’Connor U.S. Courthouse, Suite 622 401 West Washington Street, SPC 80 Phoenix, AZ 85003-215 /s/David S. Gingras

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MOTION FOR LEAVE TO AMEND

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

David S. Gingras, #021097 Gingras Law Office, PLLC 3941 E. Chandler Blvd., #106-243 Phoenix, AZ 85048 Tel.: (480) 668-3623 Fax: (480) 248-3196 David@GingrasLaw.com Attorney for Plaintiff Xcentric Ventures, LLC UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA XCENTRIC VENTURES, LLC, an Arizona limited liability company, Plaintiff, v. LISA JEAN BORODKIN and JOHN DOE BORODKIN, husband and wife; RAYMOND MOBREZ and ILIANA LLANERAS, husband and wife; DANIEL BLACKERT and JANE DOE BLACKERT, husband and wife; ASIA ECONOMIC INSTITUTE, LLC, a California limited liability company; DOES 1-10, inclusive, Defendants. For its Verified Second Amended Complaint Plaintiff XCENTRIC VENTURES, LLC alleges as follows: 1. This is an action to recover damages arising from a frivolous lawsuit
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Case No: 11-cv-1426-GMS

[PROPOSED] VERIFIED SECOND AMENDED COMPLAINT

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maliciously and wrongfully commenced and continued by Defendants against Plaintiff in the State of California (“the Asia Litigation”). PARTIES 2. Plaintiff XCENTRIC VENTURES, LLC (“Xcentric”) is an Arizona limited

liability company which operates, and at all relevant times has operated, the website www.RipoffReport.com (“Ripoff Report”). 3. Defendant LISA JEAN BORODKIN (“BORODKIN”) is an attorney
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licensed to practice law in the States of California and New York. At all times relevant to
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this action, Defendant BORODKIN was married to JOHN DOE BORODKIN and was acting on behalf of, and for the benefit of, their marital community. 4. Defendants RAYMOND MOBREZ (“MOBREZ”) and ILIANA

LLANERAS (“LLANERAS”) are, and at all relevant times were, a married couple residing in Los Angeles, California. 5. At all times relevant to this action, MOBREZ and LLANERAS were the

principals of Defendant ASIA ECONOMIC INSTITUTE, LLC (“AEI”) which is a California limited liability with its principal place of business in Los Angeles, California. 6. Defendant DANIEL BLACKERT (“BLACKERT”) is an attorney licensed

to practice law in the States of California. At all times relevant to this action, Defendant BLACKERT was married to JANE DOE BLACKERT and was acting on behalf of, and for the benefit of, their marital community. 7. DOES 1–10 are individuals and/or entities, the true names of which are not

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currently known, who are or who may be liable to Xcentric for the conduct alleged herein. JURISDICTION/VENUE 8. Defendants, and each of them, have knowingly, intentionally and

deliberately engaged in tortious activity directed at and within the State of Arizona and intentionally directed at Xcentric and Xcentric’s principals, officers, agents and employees including non-party EDWARD MAGEDSON (“Magedson”) who are residents of the State of Arizona. As more specifically alleged herein, Defendants’ actions were specifically intended to cause harm to Plaintiff within the State of Arizona and, in fact, Defendants’ actions had the intended effect of actually causing substantial harm to Plaintiff within the State of Arizona. Defendants, and each of them, are therefore properly subject to personal jurisdiction within the State of Arizona. 9. Pursuant to 28 U.S.C. § 1332, this Court has subject matter jurisdiction

because there is complete diversity among the parties and the amount in controversy exceeds $75,000.00.
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VERIFIED SECOND AMENDED COMPLAINT

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10.

Pursuant to 28 U.S.C. § 1391(a)(2), venue is proper in this judicial district

because a substantial part of the events giving rise to Plaintiff’s claims occurred here. ALLEGATIONS COMMON TO ALL CLAIMS 11. complaints. The Ripoff Report is, among other things, a website for consumer Any member of the public with access to a computer and an Internet

connection may use the Ripoff Report website to create and publish complaints about companies or individuals who they believe have wronged them in some manner. 12. Complaints published on the Ripoff Report are automatically indexed by

numerous search engines such as Google and such complaints often rank very high in Google’s search results. Because of this high ranking, individuals or businesses with complaints on the Ripoff Report website may be negatively impacted. 13. Since the site began in 1998, because of the negative impact that

complaints on the Ripoff Report website may have, Xcentric has been sued numerous times by plaintiffs seeking to remove reports or otherwise obtain damages from Xcentric for the publication of such reports. 14. As a matter of law and pursuant to the Communications Decency Act, 47

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U.S.C. § 230(c)(1) (the “CDA”), except as to certain types of intellectual property claims and criminal claims, Xcentric is generally immune from any civil cause of action arising from material posted on the Ripoff Report site by a third party. As a result of the CDA, because Xcentric normally plays no material role in the creation of the reports at issue, lawsuits seeking to force the removal of reports through litigation have frequently been dismissed or otherwise resolved in favor of Xcentric. 15. In addition to frequent praise and nearly unanimous judicial affirmation, the

CDA has also drawn substantial and widespread commentary and passionate criticism from those who disagree with or dislike the law or the results which it sometimes requires. 16. Among those who have been targeted by online criticism on the Ripoff
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Report website or elsewhere, the CDA is often seen as an unfair law which creates an 3
VERIFIED SECOND AMENDED COMPLAINT

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improper “loophole” allowing sites such as the Ripoff Report to publish derogatory and even defamatory speech with complete impunity. 17. One well-known commentary regarding both the CDA and the Ripoff

Report website is an article written by an attorney, Sarah Bird, entitled “The Anatomy of a RipOff Report Lawsuit” which was originally published on January 21, 2008 on www.SEOmoz.org (the “Bird Article”). The Bird Article purports to offer a legal

analysis of the Ripoff Report’s successful litigation history, as well as the author’s opinions regarding the CDA and her answers to the following questions, among others: “Is it true that RipOff Report has never lost a lawsuit? Is this a failure of the legal system? Are the allegations unfounded? If there is truth in the allegations, then how is the system going wrong? Why can’t RipOff Report be held responsible for its conduct?” 18. Among other things, the Bird Article contains a discussion of federal

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racketeering laws, specifically the Racketeer Influenced and Corrupt Organizations Act or “RICO”, codified at 18 U.S.C. §§ 1961, et seq., and the predicate act of extortion. Among other things, the Bird Article suggests that plaintiffs seeking to avoid the limitations imposed by the CDA may be able to do so by pursing federal RICO claims against Xcentric predicated upon alleged acts of extortion. 19. In closing, the author of the Bird Article specifically encouraged litigants to

attempt to overcome Xcentric’s CDA immunity by bringing claims of RICO/extortion: “I hope that plaintiffs will continue to press the RICO/Extortion combo … .” 20. On January 28, 2009, a third party posted a complaint on the Ripoff Report

website concerning AEI, MOBREZ, and LLANERAS. The report was written from the perspective of an unhappy former employee and it contained various derogatory statements about AEI, MOBREZ, and LLANERAS. Other similar reports were
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subsequently posted on the site by third parties between early 2009 and early 2010. 21. Upon information and belief, the reports posted on Ripoff Report about 4
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AEI, MOBREZ and LLANERAS contained numerous statements of fact which were

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derogatory in nature but were either completely or substantially true. Specifically, in Report #417493 posted on January 28, 2009, the author claimed, among other things: [T]he credentials of Raymond Mobrez, Director of the [Asia Economic] Institute, and Iliana Llaneras, are as muddled as they can possibly be. He claims to be a Ph.D. in Human Resources or something of the other to increase his ability to reel you in during an interview. The truth is that there are no credentials to back up the scheme that they are running. 22. To the extent the statement in Report #417493 accused Mr. Mobrez of
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falsely representing himself as the holder of a legitimate doctoral degree, this statement was entirely true. The sole basis for Mr. Mobrez’s alleged doctoral status is a document issued by “La Jolla University, San Diego, California” to “RAYMOND MOBAREZ [sic]” which purported to confer upon him a degree of “DOCTOR OF PHILOSOPHY IN HUMAN BEHAVIOR” in December 1992. 23. Mr. Mobrez’s alleged doctoral degree is fake. “La Jolla University” (which

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is no longer in operation) was a “diploma mill” that sold false educational credentials, not a legitimate or accredited educational institution. 24. There is not now, nor has there ever been, any accredited university or

educational institution in San Diego, California known as “La Jolla University”. Upon information and belief, the only physical presence “La Jolla University” has ever had in the State of California was a post office box. Upon information and belief, Mr. Mobrez purchased the purported doctoral degree without completing any actual course of study, without attending any classes, without meeting a single professor, and without preparing a thesis, dissertation, or similar work demonstrating his academic achievement. 25. Based on the publication of these reports and despite knowing that the

reports contained numerous statements of fact which were entirely or substantially true, Defendants MOBREZ and LLANERAS decided to commence litigation against XCENTRIC and Magedson. 26. Prior to the commencement of the Asia Litigation, Defendants MOBREZ
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and/or LLANERAS and/or BLACKERT and/or Does 1-10 performed legal research and 5
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requested that unknown others perform research, on previous lawsuits involving XCENTRIC. During the course of this research, Defendants MOBREZ, LLANERAS, and BLACKERT reviewed the Bird Article, among other things, and determined that based on the CDA, litigation against XCENTRIC and Magedson was extremely unlikely to succeed, assuming the litigation merely accused XCENTRIC and/or Magedson of publishing material submitted to the Ripoff Report website by a third party. 27. Based on this conclusion, Defendants MOBREZ, LLANERAS, and

BLACKERT determined that an alternative litigation strategy was necessary such as the RICO/extortion theory advocated in the Bird Article. However, Defendants MOBREZ, LLANERAS, and BLACKERT knew that they could not legitimately present such a theory because at no time was AEI actually extorted by XCENTRIC or Magedson. 28. To solve this problem, at some time in or around April 2009, Defendants

MOBREZ and LLANERAS devised a plan, to wit: Defendant MOBREZ would contact Magedson by telephone and would attempt to induce Magedson to ask for money in exchange for the removal of the reports about AEI thereby permitting AEI to proceed with litigation under a RICO/extortion theory. 29. In furtherance of this plan, in April and May 2009 MOBREZ placed a

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series of seven telephone calls to Magedson using the primary phone number listed on the Ripoff Report website; (602) 359-4357. The date, time, and duration of each call from MOBREZ to Magedson is reflected in the table below: TABLE OF CALLS Call # 1 2 3 4 5 6 7 Date 4/27/2009 4/27/2009 4/27/2009 5/5/2009 5/5/2009 5/9/2009 5/12/2009 Start Time 3:21 PM 3:27 PM 3:28 PM 11:28 AM 1:05 PM 1:10 PM 2:46 PM Call From # (310) 806-3000 (310) 806-3000 (310) 806-3000 (310) 806-3000 (310) 806-3000 (310) 801-5161 (310) 806-3000 6
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Length Min 3.5 1.0 2.9 2.6 2.2 .5 16.5
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30.

Defendant LLANERAS was secretly listening to calls #4, 5 and 7 from

Defendant MOBREZ to Magedson without Magedson’s knowledge. 31. 32. Calls #3 and 6 were voicemails left by MOBREZ for Mr. Magedson. Following the completion of the calls and on the last day prior to the

expiration of the statute of limitations as to the first report about AEI, on January 27, 2010 Defendants AEI, MOBREZ, LLANERAS, and BLACKERT commenced the Asia Litigation which began in the Los Angeles County Superior Court, Case No. SC106603. The action was subsequently removed to the United States District Court, Central District of California, Case No. 2:10-cv-01360-SVW–PJW. 33. A true and correct copy of the original 33-page Complaint filed in the Asia

Litigation, excluding exhibits, is attached hereto as Exhibit A. 34. In their initial Complaint AEI, MOBREZ, and LLANERAS asserted twelve

claims for relief against XCENTRIC and Magedson including two federal RICO causes of action, one predicated on “extortion” or “attempted extortion” and one predicated on “wire fraud”. The Complaint accused XCENTRIC and Magedson of engaging in a “SHAKEDOWN” by, among other things, “offer[ing] to enroll Plaintiffs in the CAP program for a fee of at least five thousand dollars ($5,000), plus a monthly monitoring fee.” 35. At a hearing which took place on April 19, 2010, Defendant BORODKIN

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entered an appearance in the Asia Litigation as counsel for AEI, MOBREZ, and LLANERAS. From April 19, 2010 through the final conclusion of the case, Defendant BORODKIN was actively involved in the Asia Litigation as lead counsel for MOBREZ, LLANERAS, and AEI. 36. At the conclusion of the hearing, the District Court issued an order, a true

and correct copy of which is attached hereto as Exhibit B. In the April 19th order, the Court required “plaintiff” (meaning AEI, MOBREZ, and LLANERAS) to “file a declaration describing meetings with any representative of defendant regarding extortion[]” and to do so within two weeks.
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37.

On the last day to do so, May 3, 2010, MOBREZ and LLANERAS filed

their declarations with the Court as ordered. True and correct copies of their declarations are attached hereto as Exhibits C and D, respectively. Both declarations were sworn to as true and correct under penalty of perjury pursuant to 28 U.S.C. § 1746. Both

declarations contain BORODKIN’s name and California state bar number in the counsel section of the caption, and upon information and belief, BORODKIN was actively involved in the preparation of both declarations. 38. In his declaration, Defendant MOBREZ detailed the alleged contents of his
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telephone calls to Magedson in April and May 2009. In Paragraph 10 of his declaration, Defendant MOBREZ described one such conversation with Magedson as follows: On May 5, 2009, I again contacted the Ripoff Report office by phone. I asked the man, who now identified himself as Ed Magedson, if he had received the e-mail I sent to him February 28, 2009. Mr. Magedson responded that I would need to enroll in the CAP program. Again, I asked for more information regarding the program, including the cost of participation. Mr. Magedson proceeded to describe his Web site and how it could benefit us. He then emphasized that his Web site has immunity under the law and, therefore could not be sued. Moreover, he claimed to have a team of lawyers that would fight us if we chose to sue him. He further warned that others had tried but failed and that it was best to just “go with the program.” Ms. Llaneras witnessed this conversation from her office phone. 39. In Paragraph 13 of his declaration, Defendant MOBREZ described a
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second conversation with Mr. Magedson as follows: Later that day, I responded to Mr. Magedson’s e-mail by phone. I told Mr. Magedson that I had received his e-mail and was still uncertain what he wanted me to do. Mr. Magedson responded that I would have to go onto his Web site and enroll in the CAP program. When asked what it would cost for us to participate in his program, Mr. Magedson replied that it would cost us at least "five grand" plus a monthly maintenance fee of a couple hundred dollars. He stated that these charges were based on the size if [sic] company. Specifically, he stated that the more money a company made, the more they would be charged. When asked the reasoning behind this, he was not responsive. He again instructed me to fill out the CAP forms. Again, Ms. Llaneras listened from her office phone. 8
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40.

Among other allegations, the allegation that Mr. Magedson demanded “at

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least ‘five grand’” from Defendant MOBREZ formed the primary basis for the claim that XCENTRIC and Magedson engaged in extortion as to AEI, MOBREZ, and LLANERAS. 41. In her May 3, 2010 declaration, Defendant LLANERAS testified under

penalty of perjury that “I witnessed the conversations that took place between Mr. Mobrez and Mr. Magedson on May 5th and 12th, 2009. Specifically, I listened in on the conversation from my office phone.” 42. In her May 3, 2010 declaration, Defendant LLANERAS further testified

under penalty of perjury that “Mr. Mobrez’s Declaration is a true and accurate rendition of the conversations that I witnessed between Mr. Mobrez and Mr. Magedson.” 43. In her May 3, 2010 declaration, Defendant LLANERAS further testified
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under penalty of perjury that she took handwritten notes during each conversation between Defendant MOBREZ and Magedson as the conversations occurred. Copies of LLANERAS’s handwritten notes are included within Exhibit D. 44. As shown below, LLANERAS’s notes of the second conversation between

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MOBREZ and Mr. Magedson which occurred around 1 pm on May 5, 2009 purport to document a demand from Mr. Magedson for MOBREZ to pay $5,000 plus a monthly payment for participation in Xcentric’s Corporate Advocacy Program.
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45.

On Friday, May 7, 2010, Defendant MOBREZ was deposed in Los During his

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Angeles, California regarding his allegations in the Asia Litigation.

deposition, Defendant MOBREZ reviewed his May 3, 2010 declaration and reaffirmed, again under penalty of perjury, that the statements contained in his declaration were truthful and accurate. 46. Unbeknownst to Defendants MOBREZ and LLANERAS, all of Defendant
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MOBREZ’s conversations with Mr. Magedson were automatically recorded by Xcentric’s phone system. This fact was disclosed to Defendants MOBREZ and

LLANERAS for the first time near the end of MOBREZ’s deposition on May 7. 47. At the time the recorded phone calls were disclosed and played,

BORODKIN had left the deposition. However, A CD containing the audio recordings of each conversation was attached as Exhibit 25 to MOBREZ’s deposition transcript and an additional copy of the CD containing the recordings was provided to BLACKERT at the conclusion of the deposition on May 7, 2010. An email containing attached copies of the recordings was also sent from XCENTRIC’s counsel to BLACKERT and BORODKIN on May 8, 2010. 48. As reflected in the recordings of the conversations between Defendant

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MOBREZ and Magedson, Defendants MOBREZ and LLANERAS each committed perjury when they testified that Magedson demanded $5,000 from MOBREZ in a telephone conversation on May 5, 2009. This allegation was, and is, completely false. 49. LLANERAS committed perjury in her May 3, 2010 declaration when she

stated that the documents attached to her declaration were a “true and accurate copy of the handwritten notes I took during these conversations as they occurred.” 50. The notes attached to LLANERAS’s declaration were not truthful insofar

as they purported to show that Mr. Magedson demanded $5,000 plus a monthly payment for MOBREZ’s participation in Xcentric’s Corporate Advocacy Program during the call which occurred around 1 pm on May 5, 2009. At the time she signed her declaration, LLANERAS knew this statement was completely false. 10
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51.

In truth, at no time during any telephone conversion or at any other time did

Magedson ever ask for any money from Defendants MOBREZ or LLANERAS. 52. Defendants MOBREZ and LLANERAS fabricated this allegation in an

effort to create causes of action against XCENTRIC and Magedson which they believed would be sufficient to avoid CDA immunity. By doing so, Defendants MOBREZ and LLANERAS hoped to force the removal of the reports about AEI, MOBREZ and LLANERAS on the Ripoff Report website which they knew contained truthful statements of fact and non-actionable expressions of opinion. 53. On May 11, 2010, a letter was sent to Defendants BORODKIN and
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BLACKERT, a true and correct copy of which is attached hereto as Exhibit E. Among other things, this letter reiterated that Defendant MOBREZ and LLANERAS had committed perjury and that their claims against XCENTRIC and Magedson were completely groundless. 54. In addition, the May 11, 2010 letter reminded Defendants BORODKIN and

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BLACKERT that Rule 3–700 of the California Rules of Professional Conduct required the mandatory withdrawal of any attorney who: “knows or should know that the client is bringing an action, conducting a defense, asserting a position in litigation, or taking an appeal, without probable cause and for the purpose of harassing or maliciously injuring any person … .” 55. In addition, the May 11, 2010 letter cautioned Defendants BORODKIN and

BLACKERT that: “Xcentric has successfully sued parties and their lawyers for knowingly commencing and continuing litigation that they knew was factually groundless. Xcentric intends to bring such claims against your clients for their wrongful actions and we will not hesitate to include claims against either or both of you individually if you continue to prosecute any claims in this case which you know are factually untrue or if the evidence demonstrates that you brought this case knowing that the allegations contained in it were factually untrue.” 56. The May 11, 2010 letter to Defendants BORODKIN and BLACKERT 11
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concluded with the following admonition: “In closing, I want to emphasize one obvious fact—your clients have lied about the material facts of this case. As such, just as your clients were, you now stand at a crossroads wherein you have a choice: you can do the right thing and follow the requirements set forth by the law and by your ethical duties, or your can ignore those duties and face the consequences.” 57. Following receipt of the May 11, 2010 letter, Defendants BORODKIN and

BLACKERT did not withdraw from the Asia Litigation. Instead, despite knowing that the claims made by their clients were factually untrue, they continued to pursue the case even more aggressively than before. 58. On May 20, 2010, Defendants MOBREZ and LLANERAS filed
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“Corrected” declarations with the court, true and correct copies of which are attached hereto as Exhibits F and G, respectively. Both declarations contain BORODKIN’s name and California state bar number in the counsel section of the caption, and upon information and belief, BORODKIN was actively involved in the preparation of both declarations. 59. In her “corrected declaration”, Defendant LLANERAS substantially

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recanted all of her prior testimony regarding the extortion allegedly committed by XCENTRIC and Magedson. Specifically, LLANERAS stated: “After reviewing
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documents that were previously solely in the possession of Defendants, I now believe that the descriptions of the telephone conversations in my May 3, 2010 declaration were not accurate.” 60. Nothing in LLANERAS’s corrected declaration accused either XCENTRIC

of Magedson of any wrongdoing of any kind. Although she stated that she did “recall overhearing a telephone conversation in which money was discussed[]”,LLANERAS specifically stated that she was unable to identify the caller’s voice and she did not know if the caller “was Mr. Magedson, or from the Ripoff Report or otherwise.” 61. In light of the two materially conflicting declarations from LLANERAS
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and the fact that she had recanted substantially all of her prior testimony, and upon 12
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reviewing the actual recorded conversations between Mr. Magedson and MOBREZ about which LLANERAS had testified, no reasonable attorney would believe that LLANERAS’s testimony as set forth in her corrected declaration provided probable cause for any of the claims asserted by AEI, MOBREZ and LLANERAS against Mr. Magedson and XCENTRIC in the Asia Litigation. 62. In his “corrected declaration”, Defendant MOBREZ also recanted

substantial portions of his previous testimony regarding the alleged substance of his telephone conversations with Magedson in April and May 2009. However, Defendant MOBREZ further perjured himself by testifying for the first time, “In addition, there were a number of incoming calls to me from Ripoff Report.” In truth, Defendant

MOBREZ knew that at no time were any calls ever made from Ripoff Report to him. This allegation was simply another lie intended to further his fraud upon the Court. 63. Upon information and belief, Defendants BORODKIN and BLACKERT

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assisted Defendant MOBREZ with the creation of his “corrected declaration” and in doing so BORODKIN and BLACKERT intentionally suborned perjury from MOBREZ. 64. In light of the two materially conflicting declarations from MOBREZ and

the fact that he had recanted material portions of his prior testimony, and upon reviewing the actual recorded conversations between Mr. Magedson and MOBREZ about which MOBREZ had testified, no reasonable attorney would believe that MOBREZ’s testimony as set forth in his corrected declaration provided probable cause for any of the claims asserted by AEI, MOBREZ and LLANERAS against Mr. Magedson and XCENTRIC in the Asia Litigation. 65. On May 24, 2010, XCENTRIC and Magedson filed a Motion for Summary

Judgment in the Asia Litigation which argued that AEI, MOBREZ, and LLANERAS had engaged in a fraud upon the Court by lying as to their extortion claims. The motion further argued that AEI lacked standing to pursue claims under the RICO Act and could not prevail on certain of its other claims based on uncontroverted testimony from MOBREZ which established that the claims lacked any factual basis as to certain 13
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mandatory elements including damages and causation. 66. Specifically, in their original Complaint in the Asia Litigation, AEI,

MOBREZ and LLANERAS asserted claims for among other things: a. Alleged RICO violations predicated upon “attempted extortion” in violation of 18 U.S.C. §§ 1951 and 1962(c); b. Alleged RICO violations predicated upon “wire fraud” in violation of 18 U.S.C. § 1343; c. Alleged RICO “conspiracy” in violation of 18 U.S.C. § 1962(d); and d. Unfair business practices pursuant to Cal. Bus. & Prof. Code § 17200 predicted in substantial part upon XCENTRIC’s alleged RICO violations. 67. Based on the uncontroverted deposition testimony of MOBREZ, no

reasonable attorney would believe that any factual or legal basis existed to pursue any of the above claims. Specifically, civil claims for alleged RICO violations require proof of actual economic loss and cannot be based on “presumed” damages. Instead, such claims require proof that the plaintiff suffered actual loss to his “business or property” and that such losses were actually and proximately caused by reason of the alleged conduct constituting the RICO violation. 68. Prior to her involvement in the Asia Litigation, BORODKIN had
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substantial experience and familiarity with the causation and damages standards for federal civil RICO claims. Specifically, in 2003–04, BORODKIN was co-counsel for the plaintiff in Ideal Steel Supply Corp v. Anza, 373 F.3d 251 (2nd Cir. 2004) (the “Anza Litigation”). Among other things, the Anza Litigation involved civil RICO claims

predicated upon alleged acts of wire fraud and mail fraud. 69. Among other things, a central issue in the Anza Litigation concerned

whether the plaintiff had standing to pursue civil RICO claims based on an alleged failure to properly plead actual damages and causation. Initially, the United States District Court for the Southern District of New York determined that the plaintiff had failed to 14
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sufficiently plead causation and damages, and the court therefore dismissed the RICO claims pursuant to Fed. R. Civ. P. 12(b)(6). 70. BORODKIN appealed the dismissal to the United States Court of Appeals

for the Second Circuit. In the appeal BORODKIN argued that the plaintiff’s claims were, in fact, sufficiently pleaded, even though the plaintiff itself admitted that it had not relied on any of the allegedly false statements made by the defendant in the course of the mail and wire fraud scheme. 71. The Second Circuit agreed with BORODKIN’s argument and reversed the

district court’s dismissal of the RICO claims in Ideal Steel Supply Corp v. Anza, 373 F.3d 251 (2nd Cir. 2004). 72. The United States Supreme Court subsequently granted certiorari and

reversed the Second Circuit in part, finding that the plaintiff had failed to allege sufficient facts to show direct and proximate causation as needed to support a RICO claim under 18 U.S.C. § 1962(c). See Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006). 73. Upon information and belief, although BORODKIN was not involved in

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briefing or arguing Anza before the United States Supreme Court, she reviewed the Supreme Court’s decision when it was issued in 2006. 74. Based on the Supreme Court’s decision in Anza and substantial similar

authority, BORODKIN knew that civil RICO claims required a plaintiff to allege facts sufficient to show that they suffered and actual loss to their business or property, and that such loss was actually and proximately caused by the defendant’s alleged conduct committed in violation of 18 U.S.C. § 1962(c). 75. Based solely on the testimony of MOBREZ and LLANERAS, as of at least

May 20, 2010 when their “corrected” declarations were filed, BOROKIN knew that AEI, MOBEREZ and LLANERAS did not have probable cause to pursue any civil RICO claims against XCENTRIC and Mr. Magedson because: a. Neither XCENTRIC nor Mr. Magedson had engaged in extortion, 15
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attempted extortion, or wire fraud; b. AEI, MOBEREZ and LLANERAS suffered no actual loss to their business or property; and c. To the extent that AEI, MOBEREZ and LLANERAS alleged that they suffered any actual loss based on, for instance, paying an SEO company to unsuccessfully suppress the pages on Ripoff Report, such losses were not actually or proximately caused by the alleged predicate acts of extortion, attempted extortion, or wire fraud as set forth in the Complaint. 76. As a matter of law, claims pursuant to Cal. Bus. & Prof. Code § 17200

require evidence showing that the plaintiff (1) suffered an injury in fact and (2) lost money or property as a result of the unfair competition. 77. During his deposition on May 7, 2010, MOBREZ was asked to explain:

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“What kind of business is AEI?” to which he responded “Publication, news about economics and financial.” MOBREZ was also asked whether AEI had ever sold any goods or services. MOBREZ answered “no” to both questions. MOBREZ further

testified that during nine years in operation, AEI’s total revenues were $0. 78. During his deposition on May 7, 2010, MOBREZ was asked to explain,

“How did AEI make money or try to make money?” In response, MOBREZ testified that “AEI was in the [R&D] stage, and practically they [sic] crossed the finish line. We were about to put out seminars, conferences, perhaps selling a membership to some of the programs.” MOBREZ further explained that the types of seminars at issue were “in economics, finance.” 79. When asked whether he had any experience operating a seminar business,

MOBREZ stated that he had no actual experience running a seminar business but that he had been to many seminars in the past. 80. During his deposition on May 7, 2010, MOBREZ testified that in fact, AEI
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had never actually attempted to conduct any seminars of any kind, either before the 16
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events which gave rise to the Asia Litigation or after. 81. When asked to explain how AEI planned to prove that it would have

succeeded in the seminar business without ever having attempted to hold a seminar, MOBREZ responded as follow: Seminar business, it’s a model that has been very successful throughout the United States and the world. Challenging that particular how the people will go there and why they would go there, I can’t speak of that. All I can tell you, the same thing as University of Phoenix. Opens it up the door, classrooms comes in, students will come and pay for the class. But you can’t say if we would not have built the building, how will you know somebody will go to the building. I can't speak to the speculation of that.
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82.

BLACKERT, BORODKIN and LLANERAS were each personally present

in the room when the above testimony was given by MOBREZ. 83. Based on MOBREZ’s statements to the effect that AEI had never

conducted any business of any kind and that it had never even attempted to do so either before the events which gave rise to the Asia Litigation or after, no reasonable attorney would believe that AEI had standing to assert federal civil RICO claims which require proof that the plaintiff suffered actual loss to his “business or property”. Further, based solely on MOBREZ’s testimony, no reasonable attorney would believe that AEI had standing to assert claims under to Cal. Bus. & Prof. Code § 17200 which require evidence showing that the plaintiff (1) suffered an injury in fact and (2) lost money or property as a result of the unfair competition. 84. In addition to their RICO and unfair business practice claims, AEI,

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MOBREZ and LLANERAS also asserted additional business tort claims including: a. Intentional Interference With Prospective Economic Advantage; b. Negligent Interference With Prospective Economic Advantage; and c. Inducing Breach of Contract. 85. Each of these claims were predicated in substantial part upon the theory

that XCENTRIC and Mr. Magedson unlawfully interfered with AEI’s “valid contractual relationships with current and prospective employees [of AEI]” by causing existing AEI 17
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employees to quit and/or by causing prospective job seekers to avoid seeking employment with AEI. 86. Based solely on the testimony of MOBREZ given at his May 7, 2010

deposition, BLACKERT and BORODKIN knew that no factual or legal basis existed as to any of AEI’s business tort claims. Specifically, MOBREZ testified that he could not recall the names or circumstances of any existing AEI employees who terminated their employment as a result of the events which gave rise to the Asia Litigation. In addition, MOBREZ offered no testimony of any kind that would establish that either XCENTRIC or Mr. Magedson were involved in any manner whatsoever in preventing AEI from hiring future employees. In addition, MOBREZ offered no testimony whatsoever showing that either XCENTRIC or Mr. Magedson knew of AEI’s existing relationships with its employees or that they intentionally and wrongfully interfered in those relationships. 87. Pursuant to Local Rule L.R. 7–3 of the United States District Court for the

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Central District of California, no party may make any motion without first discussing the matter thoroughly with opposing counsel. Prior to seeking summary judgment based on AEI’s lack of RICO standing, lack of RICO damages, lack of proof of actual loss, and lack of evidence of causation, XCENTRIC’s counsel met and conferred extensively with BLACKERT and BORODKIN about those issues. During those conversations, BLACKERT and BORODKIN were both informed of these deficiencies and that MOBREZ’s own uncontroverted deposition testimony proved that AEI had not suffered any injury in fact and that AEI had not been damaged by any of the events which gave rise to the Asia Litigation. 88. At no time during the meet and confer process did either BLACKERT or
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BORODKIN offer any factual or legal basis to contest XCENTRIC’S arguments. Because the matter could not be resolved without court intervention, on May 24, 2010, XCENTRIC and Mr. Magedson filed a Motion for Summary Judgment, a copy of which is attached hereto as Exhibit H. 89. Despite knowing that MOBREZ and LLANERAS had lied about the 18
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factual basis of their extortion claims, and despite knowing that AEI had not suffered any injury in fact and that AEI had not been damaged by any of the events which gave rise to the Asia Litigation, and despite knowing that no evidence existed to support an allegation that either XCENTRIC or Mr. Magedson had engaged in extortion, attempted extortion, or wire fraud as to AEI, MOBREZ, and/or LLANERAS, Defendants, and each of them, actively and aggressively opposed XCENTRIC’s Motion for Summary Judgment despite knowing that each and every claim in the Asia Litigation was factually groundless and that the action was commenced wrongfully, maliciously and for the improper purpose of harassment and seeking relief to which Defendants were not entitled as a matter of law. 90. In an effort to prolong the action and compound the harm caused, one day
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before XCENTRIC’s Motion for Summary Judgment was set to be heard, on July 9, 2010 Defendant BORODKIN filed a pleading entitled, “PLAINTIFFS’ EX PARTE MOTION (1) UNDER RULE 56(f) TO DENY OR CONTINUE DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT TO CONDUCT FURTHER DISCOVERY AND (2)

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COMPELLING DEFENDANT ED MAGEDSON TO APPEAR FOR DEPOSITION WITH DOCUMENTS AND (3) FOR SANCTIONS UNDER LOCAL CIVIL RULES 37-4 AND 83-7.” 91. In her July 9 pleading, Defendant BORODKIN vigorously argued against

the disposition of any of the claims against XCENTRIC and Magedson, claiming, “Defendants [XCENTRIC and Magedson] will do anything to avoid the August 3, 2010 trial date.” To support that position, Defendant BORODKIN accused XCENTRIC,

Magedson, and their counsel of a variety of improper conduct including, but not limited to: • “With escalating frequency, disobey and misrepresent this Court’s Orders and Rules, and dictating procedural rules of their own making” • “Harass Defendants’ [sic] counsel with veiled threats of administrative proceedings and explicit threats of Rule 11 sanctions without basis.” 92. At the time she filed the July 9 pleading, Defendant BORODKIN knew that 19
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her allegations of improper conduct against XCENTRIC, Magedson, and their counsel were completely false. 93. XCENTRIC’s Motion for Summary Judgment was argued before the
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district court on July 12, 2010. A true and correct copy of the transcript of the hearing is attached hereto as Exhibit I. BORODKIN appeared at the hearing and argued on behalf of AEI, MOBREZ and LLANERAS. 94. At this hearing, the district judge asked BORODKIN to explain the factual

basis for the damages aspect of the RICO/wire fraud portion of her case which was premised on the allegation that XCENTRIC made various false statements on its site including a statement that XCENTRIC would never agree remove reports upon request. On that point, the following colloquy occurred: [The Court]: The question again is if [Xcentric] had, in your view, said the truth that these defamatory statements will be taken down as opposed to never been taken down, how would that have defrauded your client? [Ms. Borodkin]: [The Court]: I’m sorry -For argument’s sake, I’m acknowledging or accepting for the moment that the statement wasn’t true. In other words, I’m

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [Ms. Borodkin]: [The Court]:

agreeing with you, just for argument’s sake. How would that lead to a wire fraud against your client? What would your client have done differently? Your Honor, perhaps I’d have to ask my client. See, that’s the problem, ma’am. This is, in my view, pretty -- I’m looking for a word that is not pejorative that still makes the point -pretty unacceptable lawyering because under Rule 11 you’ve now admitted to a Rule 11 violation. You filed a wire fraud allegation as a predicate act for your RICO. As you stand at the lectern, you can’t even, in a best-world sense, articulate a wire fraud. You now say you have to speak to your client. The rules clearly say that you 20
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have to have a good-faith basis for alleging something in a complaint, and how could you have had a good-faith basis without speaking to your client and now being totally unable to articulate a basis? [Ms. Borodkin]: Your Honor, with all do [sic] respect, I was not counsel of record when the complaint was filed. 95. Despite stating truthfully that she was not counsel of record when the
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original Complaint was filed, on July 12, 2010, BORODKIN knew that the RICO/wire fraud claim was groundless based on the testimony of MOBREZ given during his deposition on May 7, 2010. Specifically, BORODKIN knew the claim was groundless because MOBREZ testified in his deposition that AEI had never attempted to conduct any business of any kind either before or after the events which gave rise to the Asia Litigation. Based on her client’s own testimony, BORODKIN knew that AEI was not damaged by any alleged false statements made by XCENTRIC or Mr. Magedson. 96. This was, in fact, the true reason why BORODKIN was unable to answer

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the district court’s question regarding the wire fraud claim—not because she lacked familiarity with the facts of the case, but rather because she knew, with complete certainty based on her client’s own testimony, that no wire fraud had occurred. 97. In addition, on July 12, 2010 BORODKIN knew that the RICO/wire fraud

claim was groundless because she knew that XCENTRIC and Mr. Magedson had not made any materially false statements of fact to AEI, MOBREZ or LLANERAS, and she knew that at no time had AEI, MOBREZ or LLANERAS relied on any such statements. 98. On July 19, 2010, the District Court in the Asia Litigation issued a 53-page

order granting partial summary judgment in favor of XCENTRIC and Magedson as to the RICO/extortion claims and denying all relief requested in Defendant BORODKIN’s July 9 pleading. The court further dismissed the RICO/wire fraud claim pursuant to Fed. R. Civ. P. 9(b) but granted leave to amend. 99. Despite knowing that the case was entirely groundless and frivolous, on 21
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July 27, 2010, Defendants, and each of them, prepared and filed an 84-page First Amended Complaint (“FAC”) in the Asia Litigation supported by more than 250 pages of exhibits. A true and correct copy of the FAC (excluding exhibits) is attached hereto as Exhibit J. 100. Shortly after the hearing on XCENTRIC’s Motion for Summary Judgment
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but before the FAC was filed, the parties were ordered to participate in a settlement conference. At the time, based on oral rulings made from the bench by the district court on July 12, 2010, the parties were aware that the court intended to grant Xcentric’s summary judgment motion as to the RICO/extortion claim and that the RICO/wire fraud claim had been dismissed pursuant to Fed. R. Civ. P. 9(b) with leave to amend. 101. In light of the unsettled status of the claims against it, XCENTRIC asked

for clarification from AEI, MOBREZ and LLANERAS as to what claims, if any, they intended to continue pursuing. As a result, the magistrate judge assigned to the case ordered AEI, MOBREZ and LLANERAS to provide an email outlining their RICO/wire fraud claim “in laymen’s terms”. On July 15, 2010, BORODKIN sent an email
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containing this information as ordered. A true and correct copy of BORODKIN’s email is attached hereto as Exhibit K. 102. In her email, BORODKIN explained that her RICO/wire fraud theory was

predicated on a variety of allegedly false statements made by XCENTRIC, Mr. Magedson, and XCENTRIC’s general counsel, including the following: a. “There is a scheme to defraud, through use of the wires in interstate commerce, through [XCENTRIC and Mr. Magedson’s] false statements on websites and emails that “we never take reports down” or “reports never come down” or “reports always stay up.”; b. “There is a scheme to defraud, through the wires, though [XCENTRIC and Mr. Magedson’s] false statement “You can always file a rebuttal,” or “Anyone can file a free rebuttal”.”; c. “There is a scheme to defraud, through the wires, through [XCENTRIC 22
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and Mr. Magedson’s] false statements on the Internet and in emails that “the best thing is to file a rebuttal,” “best to file a rebuttal,” “filing a rebuttal will help” or recommendations to file a rebuttal as a step in “how to repair your online reputation.”; d. “There is a scheme to defraud, through the wires, on the “Want to sue Ripoff Report?” page of Defendants’ website through which Defendants falsely represent to the public that “Ripoff Report has never, ever (not now, and not in the past) done anything to cause Google to rank our website higher in search results than other sites.”; e. “There is a scheme to defraud in the “Want to Sue RoR?” section through which Defendants falsely represent themselves as authorities in Internet and technology law with special knowledge and giving advice on which the public is likely to rely in taking or forbearing from legal action that is contray [sic] to their interest and serves Ror's business interests.”; f. “There is a scheme to defraud, over the wires, through false statements to the effect that unlike Better Business Bureau, Ror does not filter or suppress reports.” 103. Each of the above bases, and many others, were subsequently incorporated

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into the FAC filed in the Asia Litigation. 104. At the time the FAC was filed, BORODKIN knew that each and every

alleged factual basis for the RICO/wire fraud claim was either factually or legally groundless. Specifically, at the time the FAC was filed, BORODKIN knew based on statements from MOBREZ during his May 7, 2010 deposition that AEI had not suffered any actual loss to its business or property as the result of the alleged wire fraud. 105. At the time the FAC was filed, BORODKIN knew that no evidence existed,

and had no reason to believe that any evidence existed, showing that XCENTRIC or Mr. Magedson had made materially false statements to the effect that “we never take reports 23
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down” or that AEI, MOBREZ or LLANERAS had actually relied upon such statements, or that AEI, MOBREZ or LLANERAS had any legal right to rely on such statements, or that AEI, MOBREZ or LLANERAS had suffered any actual loss to their business or property as a result of such statements. 106. At the time the FAC was filed, BORODKIN knew that no evidence existed,

and had no reason to believe that any evidence existed, showing that XCENTRIC or Mr. Magedson had made materially false statements to the effect that “You can always file a rebuttal,” or “Anyone can file a free rebuttal”. At the time the FAC was filed,

BORODKIN knew these statements were not false and that MOBREZ had, in fact, successfully post several rebuttals on XCENTRIC’s website for free. BORODKIN was aware of this because she was personally present during the portion of MOBREZ’s deposition on May 7, 2010 at which the actual reports (including MOBREZ’s rebuttals) at issue in the case were discussed and presented as exhibits 1–5 to the deposition. 107. At the time the FAC was filed, BORODKIN knew that no evidence existed,

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and had no reason to believe that any evidence existed, showing that AEI, MOBREZ or LLANERAS were damaged in any way by XCENTRIC and Mr. Magedson’s statements to the effect that “You can always file a rebuttal,” or “Anyone can file a free rebuttal”. 108. At the time the FAC was filed, BORODKIN knew that that XCENTRIC

and Mr. Magedson’s statements to the effect that “the best thing is to file a rebuttal,” “best to file a rebuttal,” “filing a rebuttal will help” or recommendations to file a rebuttal as a step in “how to repair your online reputation” were not false and that they were not actionable as fraud because they were merely expressions of opinion, not assertions of material fact upon which AEI, MOBREZ and/or LLANERAS had a lawful right to rely. 109. At the time the FAC was filed, BORODKIN knew that no evidence existed,

and had no reason to believe that any evidence existed, showing that the “Want to sue Ripoff Report?” contained any false statements of material fact. BORODKIN only included a reference to this page as support for the RICO/wire fraud allegations after learning that the page was written, in substantial part, by XCENTRIC’s general counsel. 24
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110.

At the time the FAC was filed, BORODKIN knew that the statements

contained on the “Want to sue Ripoff Report?” page, to the extent they discussed any points of law, were entirely truthful and accurate and that even if they were not, a party has no right to rely upon an adversary’s legal analysis; “It is well established … that misrepresentations of the law are not actionable as fraud, including under the mail and wire fraud statutes, because statements of the law are considered merely opinions and may not be relied upon absent special circumstances not present here.” Sosa v. DIRECTV, Inc., 437 F.3d 923, 940 (9th Cir. 2006). 111. At the time the FAC was filed, BORODKIN knew that no “special

circumstances” existed that would have provided AEI, MOBREZ and/or LLANERAS with the legal right to rely on any of the legal analysis contained on the “Want to sue Ripoff Report?” page. 112. At the time the FAC was filed, BORODKIN believed that one particular

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statement contained on the “Want to sue Ripoff Report?” page was false to the effect that it stated: “Ripoff Report has never, ever (not now, and not in the past) done anything to cause Google to rank our website higher in search results than other sites.” 113. At the time, BORODKIN believed this statement was false because she had

heard or read a widely-circulated story about a posting on the Ripoff Report website from May 31, 2005 (Report #144627) which initially contained statements claiming that Google co-founder Sergey Brin had sexually harassed two 16-year old girls. BORODKIN believed, based on additional information she viewed online that Mr. Magedson had subsequently edited the posting by changing the name “Sergey Brin” to “Soney Bonoi”. 114. In May 2005, a third party contacted Mr. Magedson by phone and

demanded that he remove a Ripoff Report posting. After Mr. Magedson refused to comply with this request, the third party stated that he intended to retaliate by posting false and inflammatory information about Google co-founder Sergey Brin so Google might, in turn, retaliate by removing Ripoff Report from its search index. 25
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115.

Based on the threat received from the third party, Mr. Magedson Mr.

subsequently located Report #144627 less than an hour after it was posted.

Magedson concluded that the page was probably filed as part of the retaliation threat expressed by the third party. For that reason, Mr. Magedson made an editorial decision to change the name “Sergey Brin” to the fictitious name “Soney Bonoi”. 116. At no time either before the change or after did anyone from Google ever

contact XCENTRIC or Mr. Magedson to request that this change be made. To the knowledge of XCENTRIC and Mr. Magedson, Mr. Brin was never aware of this report during the short time it contained his name, and to the knowledge of XCENTRIC and Mr. Magedson, Mr. Brin has never taken any action as the result of either the report or the editorial change made by Mr. Magedson. 117. At the time the FAC was filed, BORODKIN knew that no evidence existed,

and had no reason to believe that any evidence existed, showing that Sergey Brin or anyone else at Google was personally aware of Report #144627 or of the editorial change made to the report by Mr. Magedson. 118. At the time the FAC was filed, BORODKIN had no basis of any kind of

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believe that the editorial change made by Mr. Magedson to Report #144627 had any impact upon Ripoff Report’s ranking within Google’s search results. Upon information and belief, prior to incorporating this allegation into the FAC as part of the basis for AEI, MOBREZ, and LLANERAS’s claims, BORODKIN performed no investigation of any kind to determine whether Sergey Brin or anyone else at Google was aware of Report #144627 or of the editorial change made to the report by Mr. Magedson. 119. Prior to incorporating this allegation into the FAC as part of the basis for

AEI, MOBREZ, and LLANERAS’s claims, on June 8, 2010 BORODKIN deposed Mr. Magedson and asked him to explain the basis for the change to Report #144627. 120. Based on the explanation given by Mr. Magedson during his deposition, no

reasonable attorney would believe that AEI, MOBREZ or LLANERAS had any factual or legal basis to assert any claims, under a theory of RICO/wire fraud or otherwise, based 26
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on the fact that the name “Sergey Brin” was changed to “Soney Bonoi” in Report #144627 121. Prior to incorporating this allegation into the FAC as part of the basis for

AEI, MOBREZ, and LLANERAS’s claims, BORODKIN knew that no evidence existed, and had no reason to believe that any evidence existed, showing that Google was either aware of or had “rewarded” XCENTRIC or Mr. Magedson for any of the alleged acts of “favoritism” shown towards Google as alleged in the FAC. 122. At the time the FAC was filed, BORODKIN knew that no evidence existed,

and had no reason to believe that any evidence existed, showing that AEI, MOBREZ, or LLANERAS had relied on the allegedly false statement made by XCENTRIC and Mr. Magedson to the effect that: “unlike [the] Better Business Bureau, Ror does not filter or suppress reports” or that AEI, MOBREZ, or LLANERAS had suffered any actual harm to their business or property as a result of their or anyone else’s reliance on this statement. 123. At the time the FAC was filed, BORODKIN knew that no evidence existed,

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and had no reason to believe that any evidence existed, showing that AEI, MOBREZ, or LLANERAS had actually relied on the allegedly false statement made by XCENTRIC and Mr. Magedson to the effect that: “CAP investigation results that the business is safe, reliable or otherwise can be trusted” or that AEI, MOBREZ, or LLANERAS had suffered any actual harm to their business or property as a result of their or anyone else’s reliance on this statement. 124. After the FAC was filed on July 27, 2010, XCENTRIC was required to file

a responsive pleading within 10 days, which it did. On August 6, 2010, XCENTRIC and Mr. Magedson filed a Motion to Dismiss the FAC, a copy of which is attached hereto as
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Exhibit L.
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125.

After summary judgment was granted in favor of Xcentric as to the

RICO/extortion claim in July 2010, Defendants did not merely abandon that claim. On the contrary, on August 16, 2010, Defendants BLACKERT and BORODKIN filed a 27
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Motion for Reconsideration requesting that the District Court reconsider its summary judgment ruling as to the RICO/extortion claim. In support of this request, Defendants BORODKIN and MOBREZ each submitted lengthy declarations which purported to describe unlawful “threats” made by Magedson and his counsel during a settlement conference which took place on July 20, 2010. 126. After Xcentric filed its Motion to Dismiss the FAC, on August 17, 2010,

BLACKERT filed a Motion For Leave To Amend and a Proposed Second Amended Complaint (“SAC”), a true and correct copy of which (excluding exhibits) is attached hereto as Exhibit M. Upon information and belief, BORODKIN actively participated in the preparation of the draft SAC. 127. The purported purpose of the draft SAC was to address certain deficiencies
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in the FAC which had caused XCENTRIC to serve BORODKIN and BLACKERT with a draft Motion for Rule 11 Sanctions on August 3, 2010. However, despite omitting certain labels such as “wire fraud”, the claims in the draft SAC continued to rely upon virtually all of the same groundless factual bases as explained above, including, for example, the suggestion that XCENTRIC had defrauded the public at large by showing preferential treatment to Google co-founder Sergey Brin. These same factual allegations were recast as claims for “Deceit” in violation of Cal. Civ. Code §§ 1709 and 1710 and “Fraud” in violation of Cal. Civ. Code § 1572. 128. At the time the proposed SAC and leave to amend was filed, BORODKIN

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knew that no probable cause existed for the “Deceit” and “Fraud” claims based on the testimony of MOBREZ and based on her knowledge that no evidence existed to support mandatory elements of such claims including falsity, reliance, causation, and damages. 129. On September 20, 2010, a hearing was held in Los Angeles in the Asia

Litigation. Although the docket reflected that the matter was set for oral argument on XCENTRIC’s Motion to Dismiss the FAC, and other associated motions, the district court did not consider the Motion to Dismiss. Instead, the district judge ordered that the RICO claims were “stricken” and stated that the “operative pleading” would be the 28
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existing FAC. The court further instructed Xcentric to file a Motion for Summary Judgment within seven days. A true and correct copy of the court’s minutes from the September 20, 2010 hearing is attached hereto as Exhibit N. 130. On September 27, 2010, as ordered, XCENTRIC filed a Motion for
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Summary Judgment as to the First Amended Complaint in the Asia litigation. At the time the motion was filed, the matter was set for hearing on November 1, 2010. At that time, all discovery in the Asia Litigation was automatically stayed due to the fact that in addition to the Motion for Summary Judgment, Xcentric also filed a Special Motion to Strike pursuant to Cal. Code Civ. P. § 425.16. 131. In or around mid-October 2010, XCENTRIC learned that BORODKIN had
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been in touch with JAMES ROGERS (“ROGERS”), an individual who was previously employed as a personal assistant to Magedson. ROGERS informed Mr. Magedson that BORODKIN had asked him (ROGERS) to steal confidential documents from XCENTRIC and to bring them to BORODKIN in California for possible use in the Asia Litigation. 132. Upon learning this, although it believed that ROGERS had no relevant

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information which might affect the Asia Litigation, XCENTRIC became concerned that BORODKIN might attempt to use her conversations with ROGERS as a basis to file a last-minute motion for relief under Fed. R. Civ. P. 56(f) as she previously did in response to XCENTRIC’s first Motion for Summary Judgment. XCENTRIC was concerned that further delays in the case would result in additional litigation expenses. 133. To prevent this, on Friday, October 22, 2010, XCENTRIC’s counsel in the

Asia Litigation spoke with BORODKIN by phone and offered to allow her to take the deposition of ROGERS at any time and in any location of her choosing. At the time this offer was made, BORODKIN had no right to pursue discovery in the California case because of the automatic stay imposed by Cal. Code Civ. P. § 425.16(g). BORODKIN did not accept the offer to depose ROGERS, but stated that she would discuss it with MOBREZ and LLANERAS and respond at a later time. 29
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134.

On Friday, October 22, 2010, XCENTRIC’s counsel sent an email to

BORODKIN documenting their phone conversation from earlier that day. A true and correct copy of the email is attached hereto as Exhibit O. 135. In this email, XCENTRIC offered to agree that BORODKIN may depose
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ROGERS at any time and in any location of her choosing. BORODKIN never accepted or responded to XCENTRIC’s verbal or written offers regarding the deposition of ROGERS. 136. Less than two hours before the November 1, 2010 summary judgment

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hearing and knowing that XCENTRIC’s counsel would be traveling from Arizona to Los Angeles for the hearing, Defendant BORODKIN filed a second motion requesting relief under Rule 56(f). Defendant BORODKIN supported her second Rule 56(f) motion with a declaration in which she described, at length, her recent communications with ROGERS. Defendant BORODKIN further declared that a Rule 56(f) continuance was needed due to her inability to obtain ROGERS’ deposition prior to the November 1, 2010 summary judgment hearing. 137. In her declaration, Defendant BORODKIN made knowingly false and
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misleading statements to the court regarding the circumstances of ROGERS’ deposition. Specifically, Defendant BORODKIN declared: On or about October 22, 2010, I received a telephone call from Defendants’ attorney David Gingras. We again spoke about the possibility of avoiding this motion – but his proposal – that I fly to Phoenix the next day, Saturday, October 23, 2010 to do a joint deposition of Mr. Rogers, did not seem feasible. Plaintiffs had already purchased an airline ticket for Mr. Rogers for October 23, 2010. 138. Defendant BORODKIN’s declaration was false and intentionally
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misleading insofar as she implied that the only option she was given for taking the deposition of ROGERS to “fly to Phoenix the next day … .” In truth, as reflected in Exhibit O, XCENTRIC offered “to allow you to take the deposition of James Rogers immediately at any time prior to Nov. 1st and at any place … .” Defendant BORODKIN 30
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intentionally sought to mislead the Court at to this issue in the hopes that doing so would permit her to further harm XCENTRIC and Magedson by prolonging the Asia Litigation. 139. purpose. BORODKIN did not file the second Rule 56(f) motion for any legitimate

Instead, the sole reason BORODKIN filed the motion was to delay the

disposition of the case even though she knew the entire action lacked probable cause and was being pursued maliciously. 140. On November 1, 2010 after XCENTRIC’s counsel had arrived in Los

Angeles from Arizona, the District Court vacated the hearing on XCENTRIC’s second Motion for Summary Judgment. The hearing was vacated solely due to the last minute filing of Defendant BORODKIN’s second Rule 56(f) motion. 141. On May 4, 2011, the District Court issued an order denying Defendant

BORODKIN’s second Rule 56(f) motion in its entirety and granting summary judgment in favor of XCENTRIC and Magedson as to all claims in the Asia Litigation. In a footnote to its order, on the issue of Defendant BORODKIN’s second Rule 56(f) motion, the District Court noted: The Court notes that this eleventh hour filing was consistent with Plaintiffs’ pattern in this case. On Friday, July 9, 2010, one day before to the previous summary judgment hearing in this case, Plaintiffs also filed an Ex Parte Application to deny or continue Defendants' motion for summary judgment so as to allow Plaintiffs to conduct further discovery under Federal Rule of Civil Procedure 56(f). [Docket no. 87]. That ex parte application was denied in the Court’s July [Docket no. 94]. Plaintiffs have demonstrated a pattern of filing papers late in this case and generally disregarding the scheduling orders of the Court. 142. By virtue of the May 4, 2011 summary judgment order, the Asia Litigation
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\

was resolved in favor of XCENTRIC and Magedson and against AEI, MOBREZ and LLANERAS with respect to all claims and all relief requested. 143. On June 15, 2011, a final judgment was entered in the Asia Litigation, a
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copy of which is attached hereto as Exhibit P. The final judgment resolved the Asia Litigation in favor of XCENTRIC and Magedson and against AEI, MOBREZ and 31
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LLANERAS with respect to all claims and all relief requested. FIRST CAUSE OF ACTION WRONGFUL INITIATION OF CIVIL PROCEEDINGS (Against AEI, MOBREZ, LLANERAS and BLACKERT) 144. 145. Xcentric incorporates the above allegations as if fully set forth herein. At the time the Asia Litigation was commenced, Defendants AEI,
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MOBREZ, LLANERAS and BLACKERT each knew the action was factually groundless as to each and every claim. 146. At the time the Asia Litigation was commenced, Defendants AEI,

MOBREZ, LLANERAS and BLACKERT each knew the action was factually groundless in particular as to the allegations of RICO/extortion and RICO/wire fraud. 147. Defendants AEI, MOBREZ, LLANERAS and BLACKERT commenced

the Asia Litigation without probable cause. 148. Defendants AEI, MOBREZ, LLANERAS and BLACKERT commenced Specifically, the action was

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the Asia Litigation solely for improper purposes.

commenced solely for non-legitimate reasons including, but not limited to, the following: a. To pressure Xcentric to remove material from the Ripoff Report website, without any legal basis for doing so, rather than incurring significant legal fees defending a frivolous case; To discourage XCENTRIC from allowing consumers to post complaints about MOBREZ, LLANERAS, AEI on the Ripoff Report website in the future; To create the false impression that MOBREZ, LLANERAS, AEI were “victims” of extortion when, in fact, they were not; To provide unwarranted support to critics of the Ripoff Report website; To stifle the First Amendment rights of XCENTRIC and users of the Ripoff Report website; To cause XCENTRIC to divert its resources to defending a frivolous case rather than using those resources to improve the Ripoff Report site;
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g.

To intimidate XCENTRIC into limiting the public’s ability to use the Ripoff Report website to publish truthful information and access truthful information published by others;

h.

To wrongfully investigate Magedson’s personal life and to obtain and publicly release personal, private, confidential and/or embarrassing information solely for the purpose of embarrassment and harassment. 149. Defendants’ wrongful conduct was the actual and proximate cause of
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injury, damage, loss, or harm to XCENTRIC in an amount in excess of $75,000.00, the exact amount of which shall be proven at trial. 150. The actions of Defendants AEI, MOBREZ, LLANERAS and BLACKERT

were willful, malicious, and the product of an evil hand guided by an evil mind. Defendants, and each of them, specifically intended to harm XCENTRIC to an extent sufficient to entitle it to recover punitive damages in an amount to be proven at trial. SECOND CAUSE OF ACTION WRONGFUL CONTINUATION OF CIVIL PROCEEDINGS (Against BORODKIN, AEI, MOBREZ, LLANERAS and BLACKERT) 151. 152. Xcentric incorporates the above allegations as if fully set forth herein. At the time the Asia Litigation was commenced, Defendants AEI,
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MOBREZ, LLANERAS and BLACKERT each knew the action was factually groundless as to each and every claim. 153. As of no later than May 7, 2010, Defendants BORODKIN and

BLACKERT knew, with absolute certainty, that Defendants MOBREZ and LLANERAS had committed perjury and that their claims of extortion were totally and completely fabricated and false. 154. Following the deposition of Defendant MOBREZ on May 7, 2010,
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Defendant BLACKERT sent an email announcing his intent to withdraw from the Asia Litigation. A true and correct copy of the email is attached hereto as Exhibit Q. In his email, Defendant BLACKERT stated, among other things, “You have to realize this is a
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shock to me. Per my own indepedent [sic] research I need to withdraw from the case and explain why. In light of todays events I have a serious conflict of interest and will withdraw as counsel … Moreover, I urged my client to dismiss this case.” 155. Despite expressing his understanding of the ethical requirement that he

withdraw from the Asia Litigation, Defendant BLACKERT did not withdraw from the case. Upon information and belief, Defendant BORODKIN actively urged and pressured BLACKERT not to withdraw and to continue pursuing the matter despite knowing that it was entirely groundless and unlawful. 156. In or around August 2010, although he never formally withdrew from the Upon

matter, Defendant BLACKERT ceased participating in the Asia Litigation.

information and belief, Defendant BLACKERT ceased participating in the action because he knew that doing so was unlawful, unethical, and wrongful. 157. 158. At no time did Defendant BORODKIN withdraw from the Asia Litigation. Upon information and belief, BORODKIN actively assisted in preparing

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and filing the FAC despite knowing that each and every claim therein lacked probable cause. Based on her own client’s uncontroverted deposition testimony and as explained further above, BORODKIN knew that each of the following claims was completely devoid of probable cause: a. Alleged RICO violations predicated upon “attempted extortion” in violation of 18 U.S.C. §§ 1951 and 1962(c); b. Alleged RICO violations predicated upon “wire fraud” in violation of 18 U.S.C. § 1343; c. Alleged RICO “conspiracy” in violation of 18 U.S.C. § 1962(d); and d. Unfair business practices pursuant to Cal. Bus. & Prof. Code § 17200 predicted in substantial part upon XCENTRIC’s alleged RICO violations. 159. Based on her own client’s uncontroverted deposition testimony and as
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explained further above, BORODKIN knew, at least as early as May 7, 2010, that AEI 34
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had not suffered any injury to its business or property. Despite such knowledge, BORODKIN continued to ruthlessly pursue each and every claim as aggressively as possible and in a manner specifically intended to cause XCENTRIC to needlessly incur the largest amount of attorney’s fees and costs possible. 160. Based on her personal knowledge of the “original” and “corrected”

declarations of MOBREZ and LLANERAS, BORODKIN knew, at least as early as May 20, 2010 when the corrected declarations were filed, that no factual basis existed to allege that AEI, MOBREZ and LLANERAS were victims of “extortion” or “attempted extortion” based on Mr. Magedson demanding $5,000 from MOBREZ during a telephone calls. BORODKIN knew the factual predicate of the “extortion” or “attempted extortion” by Mr. Magedson was wholly untrue because her own clients filed declarations under penalty of perjury which stated that no such extortion had occurred. 161. Specifically, the corrected declaration of LLANERAS unequivocally

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stated: “After reviewing documents that were previously solely in the possession of Defendants, I now believe that the descriptions of the telephone conversations in my May 3, 2010 declaration were not accurate.” Nothing else in either LLANERAS’ or

MOBREZ’s corrected declarations established that either XCENTRIC or Mr. Magedson had committed “extortion” or “attempted extortion” against AEI, MOBREZ or LLANERAS. 162. Despite knowing that her clients were never victims of “extortion” or

“attempted” extortion, BORODKIN continued to ruthlessly pursue the RICO/extortion claim as aggressively as possible and in a manner specifically intended to cause XCENTRIC to needlessly incur the largest amount of attorney’s fees and costs possible. Despite knowing that there was no factual basis of any kind for the claim, BORODKIN actively opposed XCENTRIC’s Motion for Summary Judgment as to the RICO/extortion claim, requested relief pursuant to Rule 56(f) in order to delay the disposition of that claim despite knowing there was no basis for such a request, mocked and condemned XCENTRIC and its counsel for attempting to “avoid trial” as to that claim, and filed a
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Motion for Reconsideration as to that claim after summary judgment was granted in XCENTRIC’s favor. 163. Based on her own client’s uncontroverted deposition testimony and as

explained further above, BORODKIN knew that each of the following claims was completely lacking in probable cause: a. Intentional Interference With Prospective Economic Advantage; b. Negligent Interference With Prospective Economic Advantage; and c. Inducing Breach of Contract. 164. Based on her own client’s uncontroverted deposition testimony and as

explained further above, BORODKIN knew, at least as early as May 7, 2010, that AEI had no factual basis to assert any tortious interference claims against XCENTRIC or Mr. Magedson because, in fact, no such interference occurred. Despite such knowledge, BORODKIN continued to ruthlessly pursue each and every tortious interference claim as aggressively as possible and in a manner specifically intended to cause XCENTRIC to needlessly incur the largest amount of attorney’s fees and costs possible. 165. On June 14, 2010, AEI, MOBREZ, and LLANERAS filed a brief opposing

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XCENTRIC’s Motion for Summary Judgment. Among other things filed in support of their position, LLANERAS submitted a declaration which included AEI’s tax returns for the years 2006, 2007, and 2008. A true and correct copy of LLANERAS’s declaration including AEI’s tax returns is attached hereto as Exhibit R. 166. Consistent with the deposition testimony of MOBREZ, AEI’s tax returns

showed no income of any kind for the years 2006, 2007, and 2008. Further, after deductions for alleged business expenses, the returns reflect losses of -$33,680 for 2006, $101,663 for 2007, and -$13,420 for 2008. According to MOBREZ’s deposition

testimony, AEI ceased all business operations, to the extent it ever had any such operations, in 2009. 167. Despite knowing that AEI had never earned any money of any kind, and
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either before the events which gave rise to the Asia Litigation or afterwards, on July 10, 2010, BLACKERT and BORODKIN stated they would settle the Asia Litigation in exchange for a payment of $2 million from XCENTRIC. At the time, BORODKIN and BLACKERT knew that no factual or legal basis existed whatsoever to support a claim that AEI, MOBREZ and/or LLANERAS had suffered damages in the amount of $2 million or any other amount. 168. As part of her efforts to cause the maximum possible economic harm to
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XCENTRIC, in addition to other groundless pleadings, on August 3, 2010, BORODKIN prepared and filed a pleading entitled “PLAINTIFFS’ EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER REGARDING (1) THE PRESERVATION OF ELECTRONICALLY STORED INFORMATION (“ESI”) AND (2) FOR PROTECTIVE ORDER PREVENTING INTERFERENCE WITH WITNESSES; MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATION OF LISA J. BORODKIN AND CERTIFICATION OF COMPLIANCE WITH LOCAL CIVIL RULES 7-3 AND 7-19.” (the “Ex Parte TRO Application”). A true and correct copy of the Ex Parte TRO Application is attached hereto as Exhibit S. 169. Consistent with California’s rules governing emergency ex parte matters
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the Ex Parte TRO Application was scheduled for hearing two days later on August 5, 2010. 170. BORODKIN filed the Ex Parte TRO Application knowing that: A.) it was

legally groundless; B.) that the factual assertions in the motion were false; and C.) that the timing of the filing would cause severe hardship to XCENTRIC because it would interrupt and interfere with XCENTRIC’s ability to research and draft a complex and lengthy pleading in response to the 89-page FAC which it had been ordered to file on short notice. Despite this hardship, XCENTRIC responded to the Ex Parte TRO
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Application less than 24 hours later. A true and correct copy of Xcentric’s response is attached hereto as Exhibit T. 171. One of the primary factual bases for the Ex Parte TRO Application was an
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allegation supported solely by BORODKIN’s declaration to the effect that XCENTRIC had refused to agree to preserve certain unidentified electronically stored information or “ESI”, thus suggesting that XCENTRIC was destroying or failing to preserve relevant evidence. 172. At the time the Ex Parte TRO Application was filed, BORODKIN knew

her ESI-related allegations were totally false. BORODKIN knew this because she had discussed the issue at length with XCENTRIC’s outside litigation counsel, Maria Crimi Speth, who had explained that XCENTRIC’s website database was routinely backed up, and that to the extent any relevant ESI was located on pages of the Ripoff Report website, BORODKIN was free to simply view, copy and print any such pages as she might deem relevant. 173. In an attempt to contradict Ms. Speth’s version of these discussions, on

August 4, 2010, BORODKIN produced a document which purported to be a set of typewritten notes created by one of her “law clerks” while listening to a Rule 26 discovery call which took place between BORODKIN and Ms. Speth on April 27, 2010. BORODKIN described these notes as follows: “The April 27, 2010 discovery conference was memorialized in a memo by our law clerks, which I am attaching for the limited purpose of demonstrating the good-faith basis for the statements alleged about ESI. It is not a blanket waiver of the attorney work-product doctrine, but we will use it if you proceed on that part of the motion.” 174. Among other things, the notes produced by BORODKIN contained a

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statement which read, in part: “Lisa [BORODKIN] requested that the Defendants create a history of the webpage demonstrating the changes that had been made. From what I recall of that conversation, Maria Speth insisted that there was no way to preserve this type of information.” If true, this statement might have arguably provided some support for AEI, MOBREZ and LLANERAS’s contention that XCENTRIC had failed to preserve ESI relating to the Asia Litigation. The statement was, however, not true and BORODKIN knew the statement was not true.
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175.

Upon reviewing the notes produced by BORODKIN, XCENTRIC became

suspicious that the section purporting to document XCENTRIC’s failure to preserve ESI was actually added to the notes months after the fact in an effort to support BORODKIN’s Ex Parte TRO and to make the notes appear more reliable than they actually were. XCENTRIC’s outside counsel, Maria Speth, subsequently confronted BORODKIN with these suspicions and in an email dated August 4, 2010, BORODKIN admitted that the section relating to ESI “was added last week”. 176. In addition to ESI, the Ex Parte TRO Application falsely accused

XCENTRIC of “interference with witnesses” and it requested an order prohibiting such interference in the future. In truth, BORODKIN knew that XCENTRIC had done To the contrary, the only act of alleged

nothing to interfere with any witnesses.

“interference” involved XCENTRIC taking steps to publish a statement on the Ripoff Report website responding to and correcting certain false statements made in a press release issued by another attorney named Kenton Hutcherson who had been assisting BORODKIN as a “witness” in the Asia Litigation. At the time she filed the Ex Parte TRO Application, BORODKIN had no factual or legal basis whatsoever to claim that XCENTRIC’s efforts to respond to false statements made by an attorney in a press release constituted “interference with witnesses” or that she was entitled to injunctive relief on an emergency basis. 177. The Ex Parte TRO Application asked the court to order that XCENTRIC

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insert certain portions of code into the reports about AEI, MOBREZ and LLANERAS which would have the effect of removing those pages from search engines such as Google, thus making them much harder for the public to locate. BORODKIN knew, however, that no factual or legal basis existed for such a request at the time it was made. BORODKIN knew this because, among other things, she was aware that certain factual allegations regarding MOBREZ’s lack of educational credentials were entirely true. In addition, BORODKIN knew, based on her personal review of the reports during the deposition of MOBREZ on May 7, 2010, that substantial portions of the reports at issue
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contained non-actionable expressions of opinion such as one report, #564331, which contained the title “Raymond Mobrez is an idiot” and which in its entirety read: “I was interviewed by Raymond. All I can say is that he is obnoxious, fat and ugly. Oh, and the unbearable, bad breath that permeates the tiny, makeshift interview room drives me nutz.” 178. No reasonable attorney would believe that a legitimate legal basis existed to

request emergency injunctive relief requiring XCENTRIC to take steps to delist comments referring to MOBREZ as an “idiot” or suggesting that he was “obnoxious, fat, and ugly.” All reasonable attorneys would agree that such statements constitute nonactionable expressions of opinion which are protected by the First Amendment and that the First Amendment precludes the imposition of prior restraints against the publication of such speech. 179. The Ex Parte TRO Application was heard by the magistrate judge assigned

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to the case on August 6, 2010. Upon review of the briefs and hearing oral argument, BORODKIN’s motion was denied in its entirety. 180. Defendants AEI, MOBREZ, and LLANERAS continued the Asia

Litigation solely for improper purposes. Specifically, the action was continued solely for non-legitimate reasons including, but not limited to, the following: a. To pressure Xcentric to remove material from the Ripoff Report website, without any legal basis for doing so, rather than incurring significant legal fees defending a frivolous case; b. To force Xcentric to change the manner in which it conducts business by falsely accusing Xcentric of wrongful conduct despite knowing that Xcentric’s conduct was, and is, entirely lawful; c. To discourage XCENTRIC from allowing consumers to post complaints about MOBREZ, LLANERAS, AEI on the Ripoff Report website in the future; d. To create the false impression that MOBREZ, LLANERAS, AEI were “victims” of extortion when, in fact, they were not;
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e. f.

To provide unwarranted support to critics of the Ripoff Report website; To stifle the First Amendment rights of XCENTRIC and users of the Ripoff Report website;

g.

To cause XCENTRIC to divert its resources to defending a frivolous case rather than using those resources to improve the Ripoff Report site;

h.

To intimidate XCENTRIC into limiting the public’s ability to use the Ripoff Report website to publish truthful information and access truthful information published by others;

i.

To wrongfully investigate Magedson’s personal life and to obtain and publicly release personal, private, confidential and/or embarrassing information solely for the purpose of embarrassment and harassment. 181. Defendants BORODKIN and BLACKERT continued the Asia Litigation
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solely for improper purposes. Specifically, the action was continued solely for nonlegitimate reasons including, but not limited to, the following: a. To pressure Xcentric to remove material from the Ripoff Report website, without any legal basis for doing so, rather than incurring significant legal fees defending a frivolous case; b. To use the threat of continued litigation as improper leverage to coerce Xcentric into not pursuing claims against BORODKIN or BLACKERT for their past conduct in the Asia Litigation; c. d. To improperly attain unwarranted publicity for their own careers; To force Xcentric to change the manner in which it conducts business by falsely accusing Xcentric of wrongful conduct despite knowing that Xcentric’s conduct was, and is, entirely lawful; e. f. To provide unwarranted support to critics of the Ripoff Report website; To stifle the First Amendment rights of XCENTRIC and users of the Ripoff Report website; g. To cause XCENTRIC to divert its resources to defending a frivolous case
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rather than using those resources to improve the Ripoff Report site; h. To intimidate XCENTRIC into limiting the public’s ability to use the Ripoff Report website to publish truthful information and access truthful information published by others; i. To wrongfully investigate Magedson’s personal life and to obtain and publicly release personal, private, confidential and/or embarrassing information solely for the purpose of embarrassment and harassment. 182. Defendants’ wrongful conduct was the actual and proximate cause of
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injury, damage, loss, or harm to XCENTRIC in an amount in excess of $75,000.00, the exact amount of which shall be proven at trial. 183. The actions of Defendant AEI, MOBREZ, LLANERAS, BLACKERT and

BORODKIN were willful, malicious, and the product of an evil hand guided by an evil mind. Defendants, and each of them, specifically intended to harm XCENTRIC to an extent sufficient to entitle it to recover punitive damages in an amount to be proven at trial. THIRD CAUSE OF ACTION AIDING AND ABETTING TORTIOUS CONDUCT (Against All Defendants) 184. 185. Xcentric incorporates the above allegations as if fully set forth herein. Under Arizona common law, specifically the Restatement (Third) of the
Formatted: Bullets and Numbering Deleted: <#>Upon information and belief, Defendants AEI, MOBREZ, LLANERAS, BLACKERT, BORODKIN and DOES 1–10 each aided and abetted each other in the Asia Litigation as alleged above.¶

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Law Governing Lawyers § 56 and Chalpin v. Snyder, 220 Ariz. 413, 424, 207 P.3d 666, 677 (App. 2008), lawyers may, even in the absence of malice, be held liable under a theory of aiding and abetting tortious conduct committed by a client; “[w]hen a lawyer advises or assists a client in acts that subject the client to civil liability to others, those others may seek to hold the lawyer liable along with or instead of the client.” The common law of California is exactly the same; “There does not appear to be any good reason not to impose liability upon a person who inflicts harm by aiding or abetting a malicious prosecution which someone else has instituted”. Sycamore Ridge Apartments,

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LLC v. Naumann, 157 Cal.App.4th 1385, 1406, 69 Cal.Rptr.3d 561, 579 (4th Dist. 2007) (quoting Lujan v. Gordon, 70 Cal.App.3d 260, 264, 138 Cal.Rptr. 654 (1977)). 186. As an allegation in the alternative and even if BORODKIN lacked specific

malice against XCENTRIC and/or Mr. Magedson, she nevertheless knew, based on her clients’ own uncontroverted testimony and her review of the evidence and her extensive knowledge of the law, that AEI, MOBREZ and LLANERAS intended to commit a tort against XCENTRIC, to wit: malicious prosecution. 187. Upon information and belief, Defendants AEI, MOBREZ, LLANERAS,

BLACKERT, BORODKIN and DOES 1–10 each aided and abetted each other in the Asia Litigation as alleged above. 188. Based on her clients’ own uncontroverted testimony, BORODKIN knew

each and every claim in the Asia Litigation was brought without probable cause. BORODKIN further knew, based on her clients’ own uncontroverted testimony, that AEI, MOBREZ and LLANERAS had substantial malice against XCENTRIC and Mr. Magedson, and that they intended to commit a tort against XCENTRIC and Mr. Magedson. 189. Upon information and belief, Defendants AEI, MOBREZ, LLANERAS,

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BLACKERT, BORODKIN and DOES 1–10 each were each aware that the other Defendants were engaged in tortious conduct, specifically the malicious commencement and/or continuation of the Asia Litigation, for which they are liable to XCENTRIC. 190. Upon information and belief Defendants AEI, MOBREZ, LLANERAS,

BLACKERT, BORODKIN and DOES 1–10 each provided substantial assistance or encouragement to each other with the intent of promoting their wrongful conduct; specifically the malicious commencement and/or continuation of the Asia Litigation. 191. Specifically, after discovering that the action had been brought and

continued without probable cause and with malice, BORODKIN actively took steps to avoid the dismissal or adjudication of claims which she knew were entirely groundless, but not limited to, the following:
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a. Alleged RICO violations predicated upon “attempted extortion” in violation of 18 U.S.C. §§ 1951 and 1962(c); b. Alleged RICO violations predicated upon “wire fraud” in violation of 18 U.S.C. § 1343; c. Alleged RICO “conspiracy” in violation of 18 U.S.C. § 1962(d); d. Unfair business practices pursuant to Cal. Bus. & Prof. Code § 17200 predicted in substantial part upon XCENTRIC’s alleged RICO violations; e. Intentional Interference With Prospective Economic Advantage; f. Negligent Interference With Prospective Economic Advantage; and g. Inducing Breach of Contract. 192. The steps taken by BORODKIN included, but were not limited to, seeking
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a Rule 56(f) discovery continuance despite knowing there was no basis for such a request, opposing the adjudication of AEI, MOBREZ, and LLANERAS’ RICO/extortion claim despite knowing the claim was brought without probable cause and with malice, seeking reconsideration as to the adjudication of AEI, MOBREZ, and LLANERAS’ RICO/extortion claim despite knowing the claim was brought without probable cause and with malice, and filing numerous pleadings, including the Ex Parte TRO Application, seeking to expand the litigation based on facts which she knew were not true based on her clients’ own uncontroverted testimony. 193. Upon information and belief, BORODKIN took the above steps not for any

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legitimate purpose, but rather solely because she specifically intended to harass XCENTRIC, to cause as much economic harm to XCENTRIC as possible, and because she intended to assist AEI, MOBREZ, LLANERAS in seeking revenge against XCENTRIC and Mr. Magedson for “publishing” several derogatory complaints about AEI, MOBREZ, LLANERAS which BORODKIN knew were either entirely or substantially true and/or which BORODKIN knew contained non-actionable expression of opinion protected by the First Amendment.
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194.

Defendants AEI, MOBREZ, LLANERAS, BLACKERT, BORODKIN and

DOES 1–10, each acted in concert with one another during the wrongful commencement and continuation of the Asia Litigation. Pursuant to A.R.S. § 12–2506(D), Defendants and each of them are jointly and severally liable to XCENTRIC for any and all damages suffered. 195. Defendants’ wrongful conduct was the actual and proximate cause of

injury, damage, loss, or harm to XCENTRIC in an amount in excess of $75,000.00, the exact amount of which shall be proven at trial. 196. The actions of Defendant AEI, MOBREZ, LLANERAS, BLACKERT and

BORODKIN were willful, malicious, and the product of an evil hand guided by an evil mind. Defendants, and each of them, specifically intended to harm XCENTRIC to an extent sufficient to entitle it to recover punitive damages in an amount to be proven at trial. JURY DEMAND Xcentric demands trial by jury as to all issues so triable. WHEREFORE, Plaintiff XCENTRIC VENTURES, LLC prays that this Honorable Court enter judgment against Defendants as follows: A. B. C. D. For damages in an amount according to proof at trial; For punitive damages in an amount according to proof at trial; For an award of taxable costs; Any other relief deemed appropriate by the Court.
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DATED _____________ 2012. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorneys for Plaintiff XCENTRIC VENTURES, LLC

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VERIFICATION

I, EDWARD MAGEDSON, hereby state that I am the manager of XCENTRIC VENTURES, LLC, I have read the foregoing Verified Complaint and know the contents therein to be true to the best of my knowledge, except as to those matters herein stated upon information and belief, and as to such matters, I believe them to be true.

Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.

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EXECUTED ON: _____________.

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_________________________ EDWARD MAGEDSON

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Exhibit A

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Exhibit B

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL Case No. Title CV10-1360-SVW-PJWx Asia Economic Institute et al v. Xcentric Ventures LLC et al Date April 19, 2010

Present: The Honorable Paul M. Cruz Deputy Clerk

STEPHEN V. WILSON, U.S. DISTRICT JUDGE Deborah Gackle Court Reporter / Recorder Tape No.

Attorneys Present for Plaintiffs: Daniel F. Blackert Lisa Boradkin Proceedings:

Attorneys Present for Defendants: David S. Gingras

1. DEFENDANTS XCENTRIC & MAGEDSON'S SPECIAL MOTION TO STRIKE & MOTION TO REQUIRE RICO CASE STATEMENT [9] (fld 03/22/10) 2. NEW CASE STATUS CONFERENCE

Hearing and conference held. The motion is denied. Order to issue. The case is set for jury trial on August 3, 2010 at 9:00 a.m. Pretrial Conference is set for 3:30 p.m. Within two weeks, plaintiff shall file a declaration describing meetings with any representative of defendant regarding extortion. Defendant, within ten days of receipt of plaintiff’s declaration, shall file a declaration on the same issue. Also, within ten days, the parties shall meet and confer to exchange initial disclosures. The Court bifurcates damages and RICO claims. The trial will only address extortion. Motions for summary judgment may be filed anytime prior to the trial.

: Initials of Preparer
CV-90 (06/04) CIVIL MINUTES - GENERAL

10

PMC
Page 1 of 1

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Exhibit C

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DANIEL F. BLACKERT. ESQ., CSB No. 255021 LISA J. BORODKIN, ESQ. CSB No. 196412
L

Asia Economic Institute
11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Telephone (310) 806-3000 Facsimile (J 10) 826-4448 [)~111 iel, dasiaecun .oru 13Iackertcsq((j)vaIWO:Culll_ IisaJasiaecul1.orL'. IiS_~l hu,:()(lk i11' /" post. ban <.lc.<i_ cd_!! Attorney for Plaintiffs, Asia Economic Institute, Raymond Mobrez, and lIiana L1aneras

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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT
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.l.L.

OF CALIFORNIA
Case No.: 2:10-cv-01360-SVW-PJW

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13 14
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ASIA ECONOMIC INSTITUTE, a California) LLC: RAYMOND MOBREZ an individual; ) and lUANA LLANERAS, an individual, )
Plaintiffs.
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DEC LARA TION OF RAYMOND ) MOBREZ PURSUANT TO THE ) COURT'S ORDER ON APRIL 19,2010 ) REGARDING PLAINTIFFS' RICO AND ) EXTORTION CAUSES OF ACTION

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19 20 21

XCENTRIC VENTURES, LLC, an Arizona LLC, d/b/a as BADBUSINESS BUREAU and/or BADBUSINESSBUREAU.COM and/or RIP OFF REPORT and/or RIPOFFREPORT.COM; BAD BUSINESS BUREAU, LLC. organized and existing under) the laws ofSt. Kitts/Nevis, West Indies; EDWARD MAGEDSON an individual, and DOES I through 100. inclusive,
Defendants.

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Judge: Stephen V. Wilson Trial Date: August 3, 2010 Time: 9:00 AM Courtroom: 6

----------------------------)
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24

26

28

Declaration

of Raymond

Mobrez

- 1

Case 2:11-cv-01426-GMS Document 166-128Filed 12/10/12 Page 85 ofof 7 Case 2:10-cv-01360-SVW-PJW Document Filed 05/03/10 Page 2 439

2

I. Raymond Mobrez, declare under penalty of perjury as follows: I. My name is Raymond Mobrez. I am a resident of that State of California, and a

over the age of 18 years, and if called to testify in court or other proceeding I could and woul
::_)

give the following testimony which is based on my own personal knowledge unless otherwis
:
8

stated.

2.

I am a principal of Asia Economic Institute ("AEI"). AEI had been in business i At the time the defamatory posts were posted on Ripof

California for the past nine years.
10

report, AEI operated as a free, on-line, non-governmental publication of current news and events.
II

12 13

On or about February Google.com ("Goog\e")

2009, Ms. Llaneras

and I conducted

a search

0

and/or Yahoo.com ("Yahoo") using the following terms: Raymon Within the first few search results, ou

Mobrez, Mobrez. Iliana Llaneras, Llaneras, and AEI.

names appeared in association with a "Ripoff Report." The resulting text also claimed that w
17

had exploited our employees and warned search engine users not to work for AEI. The posts ar attached to Plaintiffs' Complaint.

19

4.

On February 15,2009, I sent an e-mail to Ripoff Report informing the Defendant

2C
21

of the "outlandish lies" published on their Web site. In an effort to avoid the judicial process, simply requested that the Defendants remove the posts from their Web site and identify th

22 23 24

individuals responsible. Likewise, I informed Defendants "Your false publishing has caused m and others that you have named hardship and enormous loss." At this time, I made Defendant aware of the damage we were suffering because of these posts. Specifically, I told him he ha

26

put me out of business. He was not responsive. Attached hereto as EXHIBIT A is a true an accurate copy of my February 15. 2009 e-mail to Defendants. Defendants never responded.
28

Declaration

of Raymond

Mobrez

- 2

Case 2:11-cv-01426-GMS Document 166-1 28 Filed 05/03/10 Page 86 of of 7 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 3 439

5.

After there had been no response, AEI tiled a "Rebuttal" on April 3, 2009 fo

each report listed on the Ripoff Report Web site at that time. These "rebuttals," however, do no appear as "results" on Internet search engines such as Google and Yahoo. EXHIBIT B is a true and accurate copy of the rebuttal.
6.

Attached hereto a

On April 29, 2009, I contacted the Ripoff Report office using the telephon

number listed on its Web site. I was taken through a series of voice prompts which eventually Ie
8

me to someone who identified himself as the "EDitor." The speaker immediately inquired int the size and profitability of my business. Based on my recollection, the speaker asked, amon

::'0 11

other things, whether my company was internationally based, the size of the company, and ho we were making money. I responded that AEI is an American company that has been shut dow by the accusations posted on his Web site. Later in our conversation, he boasted that Ripof

12

14

Report was at the top of all the search engines. The call was disconnected thereafter.
17 18

immediatel

Attached hereto as EXHIBIT C is a true and accurate copy of Mr. Mobrez's phon

records from April 27,2009. 7. I immediately re-dialed the number. During this brief conversation, the "EDitor'

asked if we had read about his Advocacy program. Having not been aware of this program,
20

asked what the program entailed. Our phone call was again disconnected.
22 23 24

See EXHIBIT C t

confirm the second phone call 8. Again, I re-dialed the number. During this conversation the "EDitor" told me t

read the information online regarding his "CAP." He instructed me to fill out an on-line form. was then asked to send an e-mail to ..EDitor@ripoffreport.com .. identifying myself an

26
27 25

describing the reason for my phone call. See EXHIBIT C to confirm the third phone call.

Declaration

of Raymond

Mobrez

- 3

Case 2:11-cv-01426-GMS Document 166-128Filed 12/10/12 Page 87 4 of 7 Case 2:10-cv-01360-SVW-PJW Document Filed 05/03/10 Page of 439

9.

On the following

day, I sent an e-mail to··EDitor@ripoffreport.com..

a

instructed. I offered to prove the falsity of the posts and requested the assistance of the "EDitor' in removing the bogus reports from his Web site. Attached hereto as EXHIBIT D is a true an
::,

accurate copy of my April 28, 2009 e-mail to Defendants.
10.

On May 5, 2009, I again contacted the Ripoff Report office by phone. I asked th
0

man, who now identified himself as Ed Magedson, if he had received the e-mail I sent to him

February 28, 2009. Mr. Magedson responded that I would need to enroll in the CAP program. Again. I asked for more information regarding the program, including the cost of participation.
10
11

Mr. Magedson proceeded to describe his Web site and how it could benefit us. He the emphasized that his Web site has immunity under the law and, therefore could not be sued. Moreover, he claimed to have a team of lawyers that would fight us if we chose to sue him. H further warned that others had tried but failed and that it was best to just "go with the program.'

1':

13 14
., ".L "

16
17

Ms. L1aneras witnessed this conversation from her office phone. Attached hereto as EXHIBIT is a true and accurate copy of Mr. Mobrez's phone records from May 5, 2009.
11.

After our conversation, Ire-sent

Mr. Magedson the April

zs" e-mail.

Attache

19

hereto as EXHIBIT F is a true and accurate copy of my May 5, 2009 e-mail to Defendants. 12. On May 5, 2009, Mr. Magedson made a lengthy response describing, among othe Corporate Advocacy, Business Remediation and Custome

.22

things.

the "Rip-off Report's

23 24 }::,

Satisfaction Program." The program, as described by Mr. Magedson's

e-mail, promised t

change ..the negative listings on search engines into a positive along with all the Reports on Rip off Report," I never threatened to sue Mr. Magedson or his company; yet, the e-mail warned tha a lawsuit against the Web site was a losing battle. The e-mail boasted that the Web site "NEVE

Declaration

of Raymond

Mobrez

- 4

Case 2:11-cv-01426-GMS Document 166-1 28 Filed 05/03/10 Page 88 of of 7 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 5 439

lost a case" and that suing would "only get [us] more publicity and additional listings on searc engines." EXHIBIT G is a true and accurate copy of Defendants' e-mail. 13. Later that day, I responded to Mr. Magedson's e-mail by phone. I told Mr.

Magedson that I had received his e-mail andwasstilluncertainwhathewantedmetodo.Mr.
6

Magedson responded that I would have to go onto his Web site and enroll in the CAP program. When asked what it would cost for us to participate in his program, Mr. Magedson replied that i would cost us at least "five grand" plus a monthly maintenance fee of a couple hundred dollars. He stated that these charges were based on the size if company. Specifically, he stated that th When asked the reasonin

11

more money a company made, the more they would be charged.

behind this, he was not responsive. He again instructed me to fill out the CAP forms. Again, Ms.
13
14

Llaneras listened from her office phone. See EXHIBIT E to confirm Mr. Mobrez's phone call. 14. On May 12, 2009, I contacted Mr. Magedson by phone. This phone call laste 17 minutes. During this time, I told Mr. Magedson that I was hesitant to join hi

IS 16 17

approximately

program because I could not stipulate to the allegations in the posts because they were not true. Again, I offered to prove their falsity. He was not responsive. Mr. Magedson said that I woul

19

have to agree to his terms in order for him to help. When asked what we would receive if w paid the fees he demanded, Mr. Magedson claimed that "all the negative goes away and you se

2C
21

the positive." At the conclusion of this phone call, Mr. Magedson again insisted that we fill ou
23 24 25

the necessary paperwork.

He told me that once I filled out the form and entered CAP "all of th

negative goes away and you see the positive." Ms. Llaneras witnessed this conversation from he office. EXHIBIT H is a true and accurate copy of Mr. Mobrez's phone records from May 12

26

2009.
28

Declaration

of Raymond

Mobrez

- 5

Case 2:11-cv-01426-GMS Document 166-128Filed 12/10/12 Page 89 ofof 7 Case 2:10-cv-01360-SVW-PJW Document Filed 05/03/10 Page 6 439

15.

Later that day, I received an e-mail from Mr. Magedson. The e-mail complaine

that I had driven Mr. Magedson "crazy" because I "never filled out the form." Again, Mr.
:3

Magedson provided me with a link to the required application form for the CAP.
5

Attache

hereto as EXHIBIT I is a true and accurate copy ofMr. Magedson's May 12,2009 e-mail. 16. On July 24. 2009, I responded the above e-mail and again informed Mr.

Magedson that I was hesitant to join the CAP. I refused to stipulate to the false accusation
':1

posted on his Web site. Again, Ioffered to disprove the veracity of the posts and offered to mee with Mr. Magedson in person to discuss the terms of the CAP. Attached hereto as EXHIBIT J i

10
11

a true and accurate copy of my May 5,2009 e-mail to Defendants. 17. In his e-mail responsedatedJuly24.2009.Mr. Magedson stated that there was n

12

sense of meeting. He reiterated that the Web site never removes the reports. He claimed tha "even if you were the pope .. (sic.) It would not make a difference." Again, he expressed that th

14

Web site has "spent over 3.4 million in legal fees and never lost a case."
IS
16 17
l8

Attached hereto a

EXHrBlT K is a true and accurate copy of Mr. Magedson's July 24, 2009 e-mail. 18. Despite the unremitting damage to my company, I refused to participate in th

CAP. Again, Ipleaded with him that he put us out of business and ruined our names. Sadly and, yet again. he was not responsive and, not surprisingly, again brought up the topic of money.

20 2l

Because we refused to pay Mr. Magedson, the accusatory posts continue to appear on Interne search engines such as Yahoo and Google. 19. Attached hereto as EXHIBIT L true and accurate copies of hand written note

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L. ~,

taken by me during my telephone conversations with Mr. Magedson.
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28

Declaration

of Raymond

Mobrez

- 6

Case 2:11-cv-01426-GMS Document 166-1 28 Filed 05/03/10 Page 90 of of 7 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 7 439

1

III
,I I/

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Pursuant to 28 U.S.c.. Section 1746, I declare under penalty of perjury under the laws of th
4 5 .:;
7

United States of America that the foregoing is true and correct.

EXECUTED ON: April 2, 2010.

8 9 10
11

12 13 14 15 16

i8

20 2l 22 22 24 25 26

Declaration

of Raymond

Mobrez

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 91 of 439

Exhibit D

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 92 1 439

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 93 2 439

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 94 3 439

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 95 4 439

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 96 5 439

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 97 6 439

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 98 7 439

Case 2:11-cv-01426-GMS Document 166-1 27 Filed 05/03/10 Page of of 8 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 99 8 439

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 100 of 439

Exhibit E

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 101 of 439

GINGRAS LAW OFFICE, PLLC

4072 E Mountain Vista, Phoenix, AZ 85048 ▪ Tel: (480) 668-3623 ▪ Fax: (480) 248-3196

May 11, 2010 VIA FACSIMILE: (310) 826-4448 & Email: lborodkin@gmail.com; blackertesq@yahoo.com Ms. Lisa J. Borodkin, Esq. Mr. Daniel F. Blackert, Esq. Asia Economic Institute 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025

Re:

Asia Economic Institute, LLC, et al., v. Xcentric Ventures, LLC, et al., U.S. District Court, Central District of California Case No. 10-cv-01360

Lisa and Dan:

This letter is a follow-up to several discussions we have had relating to the events which transpired during the deposition of your client, Raymond Mobrez, on Friday, May 7, 2010. As Dan knows (because he was there), and as Lisa knows (by virtue of my email to her on May 8, 2010), both of your clients have 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 Ripoff Report website, among other things. The testimony given by both of your clients could not have been more material to the claims in this case. Their false testimony literally constitutes the heart of their extortion/RICO claims. The false testimony also bears on all of the other claims in the case insofar as your clients apparently were attempting to argue that the Communications Decency Act immunity should be denied to my clients because of these acts of extortion. Based on these events, I am writing to explain my position on several issues and to demand that you provide me with your position on several issues. I. SUMMARY OF XCENTRIC’S POSITION

Our position is very simple – your clients have lied under oath and have commenced and continued an action which they knew was factually groundless. They clearly did this to maliciously harm Xcentric, harass Mr. Magedson, and to lend unjustified credibility to the lies of others who dislike the Ripoff Report’s efforts to foster and promote free speech. By their actions, your clients have violated Fed. R. Civ. P. 11 and they have exposed themselves to significant civil liability under Section 674 of the Restatement (Second) of

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 102 of 439
Ms. Lisa J. Borodkin, Esq. Mr. Daniel F. Blackert, Esq. May 11, 2010 Page 2 of 8

Torts which Arizona applies as our common law. Assuming the present federal case in Los Angeles is resolved in favor of Xcentric, a new lawsuit will immediately be filed against your clients in Arizona seeking to recover all damages caused by their illegal conduct. II. OPTIONS FOR PROCEEDING a. Mandatory Withdrawal As we have already discussed, these events give rise to serious ethical and legal concerns. Among these are your duties to the State Bar of California and to the Court. To be clear – while I am not threatening to report you to the bar or to make any reports of criminal conduct to law enforcement in order to gain any advantage in this case, at the same time I believe it is appropriate for me to stop and make note of your ethical and other obligations and to insist that you act lawfully in this case. In that regard, I note that Rule 3–700 of the California Rules of Professional Conduct appears to make it mandatory for you to withdraw from this case immediately. Specifically, the Rule states in pertinent part: Rule 3-700. Termination of Employment * * * (B) Mandatory Withdrawal. A member representing a client before a tribunal shall withdraw from employment with the permission of the tribunal, if required by its rules, and a member representing a client in other matters shall withdraw from employment, if: (1) The member knows or should know that the client is bringing an action, conducting a defense, asserting a position in litigation, or taking an appeal, without probable cause and for the purpose of harassing or maliciously injuring any person; Clearly, at least with respect to the RICO/extortion allegations, you both know that your client has taken a position that is manifestly without probable cause and which serves no purpose other than to injure and harass Xcentric. As I already stated, I understand that I cannot force to you comply with your ethical obligations, but I believe it is appropriate for me to remind you of what those obligations are and to demand that you comply with them. Of course, the events of this case give rise to other serious ethical concerns, among these are California Rules of Professional Conduct: 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); 3-210 (prohibiting a lawyer

2

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 103 of 439
Ms. Lisa J. Borodkin, Esq. Mr. Daniel F. Blackert, Esq. May 11, 2010 Page 3 of 8

from advising a client to violate the law); and 5-200(B) (prohibiting a lawyer from misleading a court by making a false statement of fact). Furthermore significant case law exists for the principle that “an attorney should make a motion to withdraw from representation when the representation will result in a violation of law or rules of professional conduct.” People v. Johnson, 62 Cal.App.4th 608, 622, 72 Cal.Rptr.2d 805, 812 (4 DCA 1998) (citing Cal. Rules of Prof. Conduct, rule 3-700(B)(2), (C)(1)(b) & (c)); People v. Brown, 203 Cal.App.3d 1335, 1339–1340, footnote 1, 250 Cal.Rptr. 762 (1988) (same). For these reasons, I would like you to inform me as soon as possible whether you intend to withdraw in this case. Normally, this decision would not be exceptionally urgent. However, because this case is set for trial on an expedited basis, and because Xcentric will need to take additional steps to protect itself from further harm in the event you refuse to withdraw, I would like to request that you provide me with your position on this issue no later than Wednesday, May 12, 2010. If you do not bring a Motion to Withdraw by that date, I will assume that you have decided not to do so.

b. Continuation Of Case On Modified Factual Theory Assuming that you do not withdraw, I believe that you may be exposing yourself to significant liability if you continue to rely on and pursue your clients’ existing factual allegations regarding extortion/RICO knowing, as you now do, that those allegations are entirely false. However, based on our conversation yesterday, I understand that you have indicated that your clients will be filing new declarations/affidavits which seek to “correct” their previous testimony. It is unclear to me how these corrections would allow you to proceed with the extortion/RICO claims. Your clients brought those claims based entirely on specific factual allegations that you now know are untrue. However, it 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. While I disagree this is even a possibility, if you intend to continue with this case on a modified and previously undisclosed theory, please let me know immediately, bearing in mind that the Court ordered your clients to disclose their factual theory as to the extortion claims no later than last Monday, May 3rd. To the extent you attempt to assert any new or different factual theories, this plainly violates the Court’s order and I will object to any modified theory on that basis. Furthermore, the deposition confirmed and in some cases revealed serious deficiencies in your evidence related to essential elements of the claims brought. It is exceedingly clear that your client can not satisfy the elements of extortion or RICO including a lack of damages and a lack of causation. The remaining claims are barred by the CDA, so the entire case has no possible hope of succeeding.

3

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 104 of 439
Ms. Lisa J. Borodkin, Esq. Mr. Daniel F. Blackert, Esq. May 11, 2010 Page 4 of 8

c. General Settlement Points As Maria and I explained to you on the phone, Xcentric has successfully sued parties and their lawyers for knowingly commencing and continuing litigation that they knew was factually groundless. Xcentric intends to bring such claims against your clients for their wrongful actions and we will not hesitate to include claims against either or both of you individually if you continue to prosecute any claims in this case which you know are factually untrue or if the evidence demonstrates that you brought this case knowing that the allegations contained in it were factually untrue. That fact notwithstanding, although the settlement window will be closing very soon, this case is actually in a good posture to be resolved without years of additional litigation. That is so because at present, Xcentric’s attorney’s fees and costs are relatively low (probably less than $25,000), and based on my discussions with Mr. Mobrez during his deposition, we believe it is likely that he has information that may be of substantial value to Xcentric. In a nutshell, I think our clients may be in a position where they can each receive something of value from an immediate resolution of this case. Thus, as Maria explained to you on the phone, we may be willing to agree to a settlement of this case based on several simple points. The first point is that your clients would need to retract their prior testimony and admit that they were never asked for money, etc., and immediately agree to the dismissal of their lawsuit with prejudice. The second point is that your clients would agree to pay all of the attorney’s fees and costs incurred by Xcentric to date which we believe are probably less than $25,000 (though this number is increasing with each passing day). The third point is that your clients would provide a full, complete, and truthful explanation of each and every third party who aided, solicited, and/or encouraged them to make their false extortion claims in this case. Ultimately, even though Xcentric has suffered damage as a result of your clients’ actions, we have a larger goal of ferreting out and stopping third parties who have helped or directed this type of fraudulent litigation. As such, Xcentric may be willing to reduce or even completely waive the amount of damages and fees your clients would have to pay depending upon how useful the information they are willing to provide is. Of course, further false testimony is of no interest to us, so we would only be willing to discuss this option in the event your clients can provide solid, verifiable evidence (preferably in the form of documents) which show what role was played by any third parties in the initiation of this case. Again, the opportunity to discuss settlement on these terms presumes that your clients will immediately end this case and immediately stop causing Xcentric to incur additional fees, so each day that passes makes this proposal less likely to be acceptable to Xcentric.

4

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 105 of 439
Ms. Lisa J. Borodkin, Esq. Mr. Daniel F. Blackert, Esq. May 11, 2010 Page 5 of 8

III.

RESPONSE TO SPECIFIC POINTS

Having stated Xcentric’s general position, I also wanted to respond to some of the specific comments/remarks made in Lisa’s email to me from this past Sunday. a. CRPC 5–100 Lisa noted that some of my prior comments referred to your clients’ criminal actions and to my decision to contact the State Bar of California. Lisa cited California Rule of Professional Conduct 5-100 which provides, in part, “A member shall not threaten to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute.” To be clear—at no time in the past have I threatened anyone with criminal or administrative charges of any kind, nor should this letter be construed as such a threat. Obviously, because this case contained allegations of extortion, I am well-aware that it would be patently illegal and unethical for me to state or imply that I would report your clients’ criminal actions to any law enforcement agency, or your actions to the State Bar of California in order to gain any advantage in this case. So that there is no misunderstanding, I want to offer some explanation of the actions I have taken along with my reasons for taking such action. Under Arizona’s ethical rules (specifically, ER 8.3(a) of the Arizona Rules of Professional Conduct), it is mandatory for a member of the bar to report any conduct by another lawyer which “raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects … .” The failure to report another attorney is, itself, an ethical violation under Arizona’s rules. Because I did not know that your clients had perjured themselves until I received their declarations on Monday, May 3, because I did not know (and still do not know) what involvement, if any, you may have had, and because I did not know whether California imposed a similar duty to report ethical violations by another attorney, I contacted the State Bar of California ethics hotline on Tuesday, May 4th, to ask for their guidance in this situation. I did not tell them your names nor did I tell them anything else about this case. I simply inquired about the nature and extent of my duties and obligations upon learning that the opposing party in a civil case had committed perjury. The person I spoke to at the bar informed me that unlike Arizona, California does not require lawyers to report such events, but she also indicated that reporting any misconduct that may occur is strongly encouraged. Of course, as I have already explained to Dan, my assumption thus far has been that both of you have been unaware of the truth. If true, then you would not have engaged in any unlawful or unethical conduct – at least up until the point where you became aware that your clients had lied under oath. From that point forward, the situation changes because now that you know the truth, you could face serious consequences if you continue representing your clients in this matter.

5

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 106 of 439
Ms. Lisa J. Borodkin, Esq. Mr. Daniel F. Blackert, Esq. May 11, 2010 Page 6 of 8

However, please note that I have never threatened to accuse anyone of a crime or to report any actions of anyone to the State Bar, whether to gain a tactical advantage or otherwise. Instead, because my clients are plainly victims of your clients’ criminal actions, I am merely demanding that both you and your clients follow all applicable laws and ethical obligations. b. Timing & Admissibility of Recordings As to the issue of timing, obviously the recordings are rebuttal evidence used solely to impeach your clients’ testimony. Under Rule 26(a), it is not necessary for any party to automatically disclose this type of evidence, so that’s why I did not disclose them to you as part of our original disclosures. I did not intend to suppress evidence, trick you, or withhold anything from you – I simply did not know that the recordings were going to be necessary until your clients claimed that the extortionate acts took place during these calls (Mr. Mobrez could just as easily have claimed they took place in writing, in person, or in some other manner other than by phone). Furthermore, as you certainly know, the first time that I learned about your clients’ specific factual allegations was in their declarations that you filed with the court on Monday, May 3, 2010. Before those declarations, your clients only made generalized allegations as to when/where/how they had been extorted, so until they both accused Mr. Magedson of demanding money over the phone on specific dates, I had no idea whether or not the recordings were going to be necessary at all. As soon as it became clear to me that the recordings were needed, I disclosed them to you, albeit only after asking Mr. Mobrez to confirm the story as contained in these declarations (which I felt I was required to do in order to protect my clients and to prevent Mr. Mobrez from changing his story again). In addition, and to respond to another of Lisa’s questions, until I actually saw your clients’ declarations, I did not know whether the recordings were admissible. This is so because although the recordings were made in Arizona, and although Arizona does not require the consent of both parties in order to record a telephone call, the law in California is different. Under Cal. Pen. Code § 623(a), calls recorded without the consent of both parties may be inadmissible in a party’s case-in-chief if the communication was “confidential”. Under § 623(c), the term “confidential” does not include any calls where the speaker knows or reasonably expects he is being recorded, nor does it apply to “any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.” Until I saw your clients’ declarations, I did not know that Ms. Llaneras was listening in to any of the calls. Of course, because Mr. Mobrez knew that she was eavesdropping (which, by itself, may have violated the law), Ms. Llaneras was kind enough to render these recordings admissible because Mr. Mobrez could not have expected that his conversations with Mr. Magedson were confidential when he knew they were being overhead by Ms. Llaneras.

6

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Ms. Lisa J. Borodkin, Esq. Mr. Daniel F. Blackert, Esq. May 11, 2010 Page 7 of 8

Although I believe there are three calls that Ms. Llaneras did not eavesdrop upon (Call #1, #3, and #6 according to my list) I am confident the court would find the recording of every call to be admissible. This is so because two of these calls were voicemails left by Mr. Mobrez (Call #3 on April 27 and Call #6 on May 6). Obviously, a person who leaves a voicemail knows that the call is being recorded, so the eavesdropping statute would not apply at all. This leaves only Call #1 on April 27. Even assuming arguendo that Mr. Mobrez could have reasonably expected that this call was not being recorded, that point is irrelevant because the exclusionary evidentiary sanction of Penal Code § 632 is not a “shield for perjury” and therefore recordings made in violation of that section can still be used for impeachment of any witness who takes the stand and lies. See Frio v. Superior Court, 203 Cal.App.3d 1480, 1497, 250 Cal.Rptr. 819, 829 (2 DCA 1988) (explaining, “the evidentiary sanction of section 632, subdivision (d), cannot be construed so as to confer upon a testifying witness the right to commit perjury.”) What this means is simple – if Mr. Mobrez testifies falsely about the contents of Call #1 (as he has already done) the recording of that call can be used for impeachment. Of course, if Mr. Mobrez chooses to testify truthfully about this call and every other call, then the recording of Call #1 is would be unnecessary. c. Authenticity of Recordings As for the authenticity of the recordings, Mr. Mobrez admitted the voice on the tape was his, so I do not think this is an issue. In terms of whether the recordings are genuine and complete, I have a couple of comments. First, the recordings were NOT made by Mr. Magedson. Rather, they were created by a third-party vendor to Xcentric who recorded the calls and then emailed the audio recordings to Mr. Magedson in the usual course of business. These calls are business records of Xcentric and the original emails from the vendor are kept in the regular course of our business. I also have the original emails with the original audio files attached to them (these vary from the ones I gave you only with respect to the file names which were changed for ease of reference and some of the meta data in the file header which was redacted in order to protect the name of the vendor until such time as a protective order can be entered). Second, if you wish, I am certainly happy to expend additional fees allowing you to investigate and confirm the authenticity of the recordings. As I already stated, absent a prompt settlement, your clients will be bearing all costs and fees incurred by Xcentric, so any costs we incur will ultimately be their responsibility. Even assuming the vendor does not maintain copies of these recordings beyond a certain date (which I have not yet been able to confirm), I am confident that an expert could review the files and the process by which they were emailed to Mr. Magedson and confirm that tampering with them would have been impossible.

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Third, you should note that in many ways, your client’s own speech on the recordings confirm that they are an accurate version of the discussions between Mr. Magedson and Mr. Mobrez. For instance, on the final recording (#7 made on May 12), Mr. Mobrez tells Mr. Magedson that he still does not know what the cost of the CAP program is. Of course, this is entirely consistent with the rest of the recordings because Mr. Magedson never told him what the cost was and never asked for any money of any kind. Similarly, in the recording of Call #6 (a voicemail call made from Mr. Mobrez’s cell phone), Mr. Mobrez’s message states that he has been talking to someone at Xcentric who “keeps hanging up and doesn’t seem to want to stay on the phone….” This is completely consistent with what the previous calls show. As such, while you might think it is prudent to take the position that there could be a small chance that the recordings have been altered, I want you understand that the consequences of taking that position could be substantial—because the facts clearly show that your clients have lied in virtually every material respect, continuing to represent them will make you jointly and severally liable for their actions. Thus, assuming the recordings have not been altered (which is obvious under the facts here), then travelling down that road in the vain hope of finding support for claims which you know to be false will not result in any reduction of your liability. In order for counsel to become personally liable for the tort of wrongful use of civil proceedings, all that is required is to show that they commenced or continued a case or claim after learning that the claim lacked “probable cause”; “one who continues a civil proceeding that has properly been begun or one who takes an active part in its continuation for an improper purpose after he has learned that there is no probable cause for the proceeding becomes liable as if he had then initiated the proceeding.” Restatement (Second) of Torts § 674, comment ‘c’. Hoping against hope that you might find probable cause in the face of such overwhelming evidence does not mean that you will do so, and if you do not do so, then you will be exposed to complete liability for continuing this case without probable cause. IV. SUMMARY

In closing, I want to emphasize one obvious fact—your clients have lied about the material facts of this case. As such, just as your clients were, you now stand at a crossroads wherein you have a choice: you can do the right thing and follow the requirements set forth by the law and by your ethical duties, or your can ignore those duties and face the consequences. Although your clients have clearly made the wrong choice, I hope that you display more wisdom and that you decide to make the right choice while it still remains available to you.
VERY TRULY YOURS,

David Gingras

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Exhibit F

Case 2:11-cv-01426-GMS Document 166-138-1 Filed 05/20/10 Pageof of 7 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 110 1 439

Case 2:11-cv-01426-GMS Document 166-138-1 Filed 05/20/10 Pageof of 7 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 111 2 439

Case 2:11-cv-01426-GMS Document 166-138-1 Filed 05/20/10 Pageof of 7 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 112 3 439

Case 2:11-cv-01426-GMS Document 166-138-1 Filed 05/20/10 Pageof of 7 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 113 4 439

Case 2:11-cv-01426-GMS Document 166-138-1 Filed 05/20/10 Pageof of 7 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 114 5 439

Case 2:11-cv-01426-GMS Document 166-138-1 Filed 05/20/10 Pageof of 7 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 115 6 439

Case 2:11-cv-01426-GMS Document 166-138-1 Filed 05/20/10 Pageof of 7 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 116 7 439

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Exhibit G

Case 2:11-cv-01426-GMS Document 166-1 36 Filed 05/20/10 Page 1 of 3 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 118 of 439

Case 2:11-cv-01426-GMS Document 166-1 36 Filed 05/20/10 Page 2 of 3 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 119 of 439

Case 2:11-cv-01426-GMS Document 166-1 36 Filed 05/20/10 Page 3 of 3 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 120 of 439

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Exhibit H

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GINGRAS LAW OFFICE, PLLC 4072 EAST MOUNTAIN VISTA DRIVE PHOENIX, ARIZONA 85048

David S. Gingras, CSB #218793 Gingras Law Office, PLLC 4072 E Mountain Vista Dr. Phoenix, AZ 85048 Tel.: (480) 639-4996 Fax: (480) 668-3623 David.Gingras@webmail.azbar.org Maria Crimi Speth, (Admitted Pro Hac Vice) Jaburg & Wilk, P.C. 3200 N. Central Ave., Suite 2000 Phoenix, AZ 85012 Tel: (602) 248-1000 Fax: (602) 248-0522 mcs@jaburgwilk.com Paul S. Berra, CSB #186675 Law Offices of Paul S. Berra 1404 3rd Street Promenade, Suite 205 Santa Monica, CA 90401 Tel: (310) 394-9700 Fax: (310) 394-9755 Paul@Berra.org Attorneys for Defendants Xcentric Ventures, LLC and Edward Magedson UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

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ASIA ECONOMIC INSTITUTE, LLC, et al., Plaintiffs, vs. XCENTRIC VENTURES, LLC, et al. Defendants.

Case No: 2:10-cv-01360-RSWL-PJW NOTICE OF MOTION AND DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Hearing Date: June 28, 2010 Time: 1:30 PM Courtroom: 6 (Hon. Stephen Wilson)

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

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GINGRAS LAW OFFICE, PLLC 4072 EAST MOUNTAIN VISTA DRIVE PHOENIX, ARIZONA 85048

TABLE OF CONTENTS
I. II. INTRODUCTION..................................................................................................2 SUMMARY OF UNDISPUTED MATERIAL FACTS .....................................2 A. III. Facts Relating to CDA Immunity ................................................................9

ARGUMENT........................................................................................................12 A. B. Plaintiffs Have Lied About Being Extorted...............................................12 AEI Lacks RICO Standing.........................................................................14 1. 2. C. D. Plaintiffs Have No Evidence Of RICO Damages ..........................15 Reputational Damages Are Not Recoverable Under RICO...........17

Defendants Are Immune Under The Communications Decency Act........19 Plaintiffs Have No Evidence To Support Their Non-RICO Claims..........23 1. 2. 3. Plaintiffs Are Not Entitled To Restitution/Injunctive Relief Under Cal. Bus. & Prof. Code § 17200............................................................23 No Evidence Exists That Defendants Intentionally Interfered With Plaintiffs’ Economic Relations ......................................................24 No Evidence Of A Conspiracy Exists............................................25

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IV.

CONCLUSION ....................................................................................................25

i DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

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TABLE OF AUTHORITIES

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986) .. 14 Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 126 S.Ct. 1991,................................................. 18 Barnes v. Yahoo!, Inc., 570 F.3d 1096 (9th Cir. 2009).................................................................. 21 Bennett v. Centerpoint Bank, 761 F.Supp. 908 (D.N.H.), aff'd without op., 953 F.2d 634 (1st Cir. 1991) ......................................................................................................................................... 18 Bradstreet v. Wong, 161 Cal.App.4th 1440, 75 Cal.Rptr.3d 253 (1st DCA 2008) ........................ 23 Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969 (9th Cir. 2008)......................................... 15 Devereaux v. Abbey, 263 F.3d 1070 (9th Cir. 2001)) .................................................................... 23 Diaz v. Gates, 420 F.3d 897 (9th Cir. 2005).................................................................................. 16 Doe v. MySpace, Inc., 474 F.Supp.2d 843 (W.D.Tex. 2007) ....................................................... 22 Farrakhan v. Gregoire, 590 F.3d 989 (9th Cir. 2010)................................................................... 23 Fireman’s Fund Ins. Co. v. Stites, 258 F.3d 1016 (9th Cir. 2001) ................................................ 16 Forsyth v. Humana, Inc., 114 F.3d 1467 (9th Cir. 1997), aff'd. on other grounds, Humana, Inc. v. Forsyth, 525 U.S. 299, 119 S.Ct. 710, 142 L.Ed.2d 753 (1999) .............................................. 17 Galen v. County of Los Angeles, 477 F.3d 652 (9th Cir. 2007)..................................................... 14 Gentry v. eBay, Inc., 99 Cal.App.4th 816, 121 Cal.Rptr.2d 703 (4 DCA 2002) ........................... 24 Genty v. Resolution Trust Corp., 937 F.2d 899 (3rd Cir. 1991) .................................................... 19 Gibson v. Craigslist, Inc., 2009 WL 1704355 (S.D.N.Y. June 15, 2009) .................................... 22 Global Royalties, Ltd. v. Xcentric Ventures, LLC, 2007 WL 2949002 (D.Ariz. 2007)................ 21 Goddard v. Google, Inc., 640 F.Supp.2d 1193 (N.D.Cal. 2009) .................................................. 22 Grogan v. Platt, 835 F.2d 844 (11th Cir. 1988) ............................................................................ 18 GW Equity, LLC v. Xcentric Ventures, LLC, 2009 WL 62173 (N.D.Tex. 2009) ......................... 20 Haroco, Inc. v. American Nat’l Bank & Trust Co. of Chicago, 747 F.2d 384 (1984), aff'd, 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437) .............................................................................. 16 Harris v. Coweta County, 2003 WL 25419527 (N.D.Ga. Sept. 23, 2003)................................... 13 Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992).... 15 Hy Cite Corp. v. Badbusinessbureau.com, LLC, 418 F.Supp.2d 1142 (D.Ariz. 2005) ................ 20

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ii DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

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Intellectual Art Multimedia, Inc. v. Milewski, 2009 WL 2915273 (N.Y.Sup. Sept. 11, 2009) .... 20 JM Martinac Shipbuilding Corp. v. Washington, 2010 WL 325950 (9th Cir. Jan. 29, 2010)....... 16 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003)........................................................................................................................................ 24 Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099 (9th Cir. 2000) ............................... 23 Padilla Rodriguez v. Llorens Quiñones, 813 F.Supp. 924 (D.Puerto Rico 1993) ........................ 17 Scott v. Harris, 550 U.S. 372, 127 S.Ct. 1769 (2007) .................................................................. 13 Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) ......... 15, 16 Whitney Information Network, Inc. v Xcentric Ventures, LLC, 2008 WL 450095 (M.D.Fla. 2008) ........................................................................................................................................... 20 Zimmerman v. HBO Affiliate Group, 834 F.2d 1163 (3rd Cir. 1987)............................................ 18

Statutes
18 U.S.C. § 1962........................................................................................................................... 15 Cal. Bus. & Prof. Code § 17200 ................................................................................................... 23 Communications Decency Act, 47 U.S.C. § 230(c)(1)................................................................. 10 18 U.S.C. § 1962(d) ...................................................................................................................... 24

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Rules
Fed. R. Civ. P.12(b)(6).................................................................................................................. 20 Fed. R. Civ. P. 56...................................................................................................................... 1, 20

iii DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

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GINGRAS LAW OFFICE, PLLC 4072 EAST MOUNTAIN VISTA DRIVE PHOENIX, ARIZONA 85048

TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: NOTICE IS HEREBY GIVEN that on June 28, 2010 at 1:30 PM or as soon thereafter as counsel may be heard in Department 6 of the above-entitled court located at 312 North Spring Street Los Angeles, CA 90012, Defendants XCENTRIC VENTURES, LLC (“Xcentric”) and EDWARD MAGEDSON (“Magedson”; collectively

“Defendants”) will move the Court for an order granting summary judgment in their favor as to all claims in this case pursuant to Fed. R. Civ. P. 56. The motion will be based on this Notice, the accompanying Memorandum of Points and Authorities, all pleadings and records on file herein, and upon such other and further oral and documentary evidence as may be presented prior to or at the time of the hearing. This motion is made following the conference of counsel pursuant to L.R. 7-3 which took place on April 28, 2010.

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GINGRAS LAW OFFICE, PLLC 4072 EAST MOUNTAIN VISTA DRIVE PHOENIX, ARIZONA 85048

MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION

Plaintiffs’ case is a fraud upon the Court. Plaintiffs have come before this court claiming to be victims of criminal wrongdoing (extortion) committed by Defendants, but in fact, the opposite is true. The only crime present here is the blatant perjury committed by Plaintiffs Raymond Mobrez and his wife, Iliana Llaneras. Plaintiffs claim to have been the victims of extortion because after they discovered allegedly false statements about them on the Ripoff Report website, they contacted Defendants, asked for these statements to be removed, and were confronted with a demand for a payment of $5,000 plus a monthly fee to make the defamation disappear. However, the undisputed evidence shows that this allegation is a deliberate lie. Plaintiffs claim the extortion occurred during a series of phone calls made by Plaintiff Raymond Mobrez to Defendant Ed Magedson in April and May 2009. To support this story, Mr. Mobrez’s wife, Plaintiff Iliana Llaneras claimed in her sworn declaration that she was secretly eavesdropping on most of these calls, and she claims to have heard Ed Magedson demand $5,000 from Mr. Mobrez. These claims were also supported by handwritten notes and phone bills showing the date/time of each call. Unfortunately for Plaintiffs, all telephone calls to Defendants were monitored and recorded by a service similar to that used by large corporations for quality assurance. These recordings prove the truth beyond any and all doubt—Mr. Mobrez and Ms. Llaneras have fabricated their allegations in this case in their entirety. Not one word of their story is true. Their entire lawsuit is a sham and a fraud upon this court. The undisputed evidence shows that Mr. Mobrez and Ms. Llaneras were never asked for money; they have simply concocted this false allegation from thin air. The

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undisputed evidence shows that Mr. Mobrez and Ms. Llaneras have also lied about every single material aspect of this case. Separate from that issue, Plaintiffs also face many incurable legal defects in their case. Summary judgment should thus be entered in favor of Defendants as to all claims in this matter along with such other relief as may be proper. 2 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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II.

SUMMARY OF UNDISPUTED MATERIAL FACTS

The material facts of this case are lengthy but undisputed. Defendant XCENTRIC VENTURES, LLC (“Xcentric”) operates the website www.RipoffReport.com.

Defendants’ Separate Statement of Material Facts (“DSOF”) ¶ 1. Defendant EDWARD MAGEDSON (“Mr. Magedson”) is the manager of Xcentric and the founder and “ED”itor of the Ripoff Report site which he started in 1998. DOSF ¶ 2. Plaintiffs RAYMOND MOBREZ (“Mr. Mobrez”) and his wife ILIANA LLANERAS (“Ms. Llaneras”) are the principals of ASIA ECONOMIC INSTITUTE, LLC (“AEI”). DOSF ¶ 3. AEI was formed as a California LLC on February 7, 2007.

DOSF ¶ 4. According to Mr. Mobrez, before it became an LLC in 2007, AEI existed as an unincorporated entity of some nature for approximately six years. DOSF ¶ 5. AEI’s business was intended to focus on producing “seminars” of some type. DOSF ¶ 6. At its peak, AEI employed approximately 27 people. DOSF ¶ 7. However, during its nine years in operation, AEI never actually produced any seminars nor did it even attempt to do so. DOSF ¶ 8. During its nine years in operation, AEI’s total revenues were $0 and its total profits were $0. DOSF ¶ 9. AEI ceased all business operations (to the extent it ever had any) in June 2009. DOSF ¶ 10. According to Mr. Mobrez, AEI’s inability to succeed was the result of only one thing—a series of negative comments which appeared on the Ripoff Report website. DOSF ¶ 11. The first report was posted on January 28, 2009. DOSF ¶ 12. Among other things, the first report (#417493) states that AEI may actually be a “money laundering operation”. DSOF ¶ 13. Subsequent postings appeared on the Ripoff Report on February 3, 2009 and June 1, 2009. DOSF ¶¶ 14, 15. After AEI ceased operations in June 2009, three more posts were made to the Ripoff Report in October 9, 2009, February 3, 2010, and February 19, 2010. DOSF ¶¶ 16–19. Negative postings about Mr. Mobrez were

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also made on other websites, including two on Mr. Mobrez’s own websites. DOSF ¶ 20. Mr. Mobrez first attempted to address these posts by sending an email to Ripoff Report on February 15, 2009. DOSF ¶ 21. He received no response. DOSF ¶ 22. 3 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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Several months later, Mr. Mobrez again tried to contact the Ripoff Report, this time by phone. DOSF ¶ 23. As reflected in his own telephone records, on April 27, 2009, Mr. Mobrez placed three separate calls to the main phone number listed on the Ripoff Report website; (602) 359-4357. DOSF ¶ 24. According to these phone bills, the first call (Call #1) lasted 3.5 minutes, the second call (Call #2) was 1.0 minute, and the third call (Call #3) was 2.9 minutes. DOSF ¶ 25. In his declaration filed in this matter on May 3, 2010, Mr. Mobrez testified that during Call #1 to the Ripoff Report, he spoke to a man who identified himself as the “ED”itor. DOSF ¶ 26. Mr. Mobrez testified that “[t]he speaker immediately inquired into the size and profitability of my business.” DOSF ¶ 27. Mr. Mobrez also testified

that the speaker asked “whether my company was internationally based, the size of the company, and how we were making money.” DOSF ¶ 28. Finally, Mr. Mobrez testified that the speaker “boasted that Ripoff Report was at the top of all the search engines.” DOSF ¶ 29. The call was disconnected immediately thereafter. DOSF ¶ 30. Mr. Mobrez testified that he called back two other times on April 27, 2009 and had two other conversations (Calls #2 and #3) with the same person. DOSF ¶ 31. In

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these brief conversations, Mr. Mobrez claimed that the speaker asked if he (Mr. Mobrez) had heard about the site’s Corporate Advocacy Program. DOSF ¶ 32. After Mr. Mobrez responded that he was not aware of the program, he testified that the speaker directed him to more information about the program online and instructed him to complete an application form for the program. DOSF ¶ 33. Mr. Mobrez followed up on these calls by sending an email to the Ripoff Report on April 28, 2009. DOSF ¶ 34. As before, he never received any response from Defendants. DOSF ¶ 35. About a week later, on May 5, 2009, Mr. Mobrez called the Ripoff Report again (Call #4) and reached a person who identified himself as “Ed Magedson”. DOSF ¶ 36. During this conversation, Mr. Mobrez claimed that Mr. Magedson discussed the CAP program, explained that Ripoff Report “has immunity under the law and therefore could not be sued[]” and thus “it was best to just go with the [CAP] program.” DOSF ¶ 37. 4 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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After Mr. Mobrez’s first conversation with Mr. Magedson on May 5, 2009, Mr. Magedson sent a lengthy email to Mr. Mobrez which is a standard form that Mr. Magedson sends to anyone who contacts the site asking about how to remove or respond to reports. DOSF ¶ 38. The email contained no threats, did not ask for money, and

explained that Ripoff Report allows anyone to post responses to complaints for free. DOSF ¶ 39. After receiving this email, Mr. Mobrez called Mr. Magedson back on the afternoon of May 5, 2009 (Call #5). DOSF ¶ 40. During this call, Mr. Mobrez and Ms. Llaneras both claim that Mr. Magedson demanded a payment of “at least ‘five grand’ [$5,000] plus a monthly maintenance fee of a couple hundred dollars” to enroll Mr. Mobrez in the Corporate Advocacy Program. DOSF ¶ 41. Mr. Mobrez also claimed that Mr. Magedson told him during this call that the amount of money charged would be based on the amount of profit earned by the company, so “the more money a company made, the more they would be charged.” DOSF ¶ 42. A week later, on May 12, 2009, Mr. Mobrez claimed that he spoke to Mr. Magedson by phone again (Call #7).1 During this call, which was the last one between the parties, Mr. Mobrez claims that he asked Mr. Magedson what he would receive if he paid the fees to participate in the CAP program. DOSF ¶ 43. In response, Mr. Mobrez claims that Mr. Magedson told him that once Mr. Mobrez completed the CAP application form and entered the program, “all the negative goes away and you see the positive.” DOSF ¶ 44. Again, Ms. Llaneras claims she overheard this discussion. DOSF ¶ 45. Mr. Mobrez never completed the CAP application form and never paid anything to Defendants. DOSF ¶ 46. Instead, on the last day before the statute of limitations expired, Mr. Mobrez and Ms. Llaneras filed this lawsuit alleging, inter alia, extortion and RICO/racketeering based on the demand for $5,000 made during these calls.
1

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As explained herein, the call on May 12 referenced in this sentence as “Call #7” is actually the sixth call described in Mr. Mobrez’s declaration. However, the evidence establishes that this call was the seventh in a series of seven calls. For that reason and for the purposes of clarity and continuity, the May 12 call will be referred to as “Call #7”. 5 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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As explained herein, every material fact comprising Plaintiffs’ extortion claim is a lie. This is demonstrated by a series of audio recordings that Xcentric’s phone system automatically made of each call from Mr. Mobrez to Mr. Magedson. In short, every discussion between Mr. Mobrez and Mr. Magedson was recorded and these recordings show the unvarnished truth—that Mr. Mobrez and Ms. Llaneras have perjured themselves and have manufactured their extortion claims from whole cloth. The real truth is as follows. In April and May 2009, Mr. Mobrez called Mr. Magedson a total of seven times. DOSF ¶ 47. Mr. Magedson never called Mr. Mobrez. DOSF ¶ 48. Table 1 below reflects the date, time, and duration of every call according

to telephone bills produced by Mr. Mobrez.2 DOSF ¶ 49.

TABLE 1—ALL CALLS PER PHONE BILLS
Call # 1 2 3 4 5 6 7 Date 4/27/2009 4/27/2009 4/27/2009 5/5/2009 5/5/2009 5/9/2009 5/12/2009 Start Time 3:21 PM 3:27 PM 3:28 PM 11:28 AM 1:05 PM 1:36 PM (est)2 2:46 PM Call From # (310) 806-3000 (310) 806-3000 (310) 806-3000 (310) 806-3000 (310) 806-3000 (310) 801-5161 (310) 806-3000 Length (Min.) 3.5 1.0 2.9 2.6 2.2 3.5 (est)2 16.5

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With the exception of Call #2, all of these calls were automatically recorded for Xcentric by a third party service. DOSF ¶ 50. Apparently, Call #2 was not recorded

because when a person calls Xcentric’s main telephone number, they are required to navigate through a series of menus before they reach Mr. Magedson. DOSF ¶ 51. The “start time” for each call is based on telephone bills that Mr. Mobrez produced pursuant to a deposition subpoena duces tecum. Although the subpoena demanded that he produce telephone records from all calls made to Defendants, Mr. Mobrez produced only his business telephone records; he did not produce any of his cell phone bills. Because Call #6 (which was recorded) was made from Mr. Mobrez’s cell phone, the actual start time of this call and the length have been estimated based on the total running time of the recording (1:36) and the ending time of the recording (1:38 PM). 6 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW
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Completing this process takes between one minute and two minutes on average, and the recording process does not begin until the caller is actually connected to Mr. Magedson. DOSF ¶ 52. Because Call #2 lasted only 1.0 minute according to Mr. Mobrez’s phone bill, it appears that this call was not successfully connected, dropped, or Mr. Mobrez simply hung up before he reached Mr. Magedson. For that reason and as

confirmed by a search of Xcentric’s business records which revealed no recording of this call, Call #2 was not recorded because Mr. Mobrez never spoke to Mr. Magedson during this call. DOSF ¶ 53. This point is not significant, however, because Mr. Mobrez does not allege that any threats or demands for money occurred during the 1.0 minute duration of Call #2. DOSF ¶ 54. Excluding Call #2, all of the other calls were recorded. A summary of the dates, ending times, and caller id information captured by Xcentric’s phone system is reflected in Table 2 below. DOSF ¶ 55. The right-hand column of Table 2 cross-references these recordings with the description of each call as set forth in the May 3, 2010 Declaration of Mr. Mobrez which is attached as Exhibit 19 to the Declaration of David Gingras filed wherewith. A CD of these calls is attached as Exhibit 25 to Mr. Gingras’ declaration.

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TABLE 2—RECORDINGS OF CALLS
Call # 1 2 3 4 5 6 7
3

Date

End Time 4/27/2009 3:25 PM 4/27/2009 Not recorded 4/27/2009 3:32 PM 5/5/2009 11:33 AM 5/5/2009 1:10 PM 5/9/2009 1:38 PM 5/12/2009 3:05 PM

Call From # (310) 806-3000 N/A (310) 806-3000 (310) 806-3000 (310) 806-3000 (310) 801-5161 (310) 806-3000

Length Min:Sec 1:35 N/A 1:20 0:51 0:35 1:36 14:45

Described in Mobrez Decl. ¶ 6 7 8 10 13 None3 14

As explained in note 2, supra, Call #6 was made from Mr. Mobrez’s cell phone. Because Mr. Mobrez apparently created his May 3, 2010 declaration based on a review of his office phone bills rather than his personal cell phone, his declaration does not contain any discussion of this call (which was a voicemail left on Xcentric’s phone system). 7 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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Comparing the transcript of each recording with a description of each call from Mr. Mobrez’s declaration demonstrates a simple truth—Mr. Mobrez and Ms. Llaneras have lied about every material aspect of this case. For example, in his May 3, 2010 declaration, Mr. Mobrez described Call #1 as follows:

Plaintiffs’ Version of Call #1 Per ¶ 6 of May 3, 2010 Mobrez Declaration ¶ 6. On April 27, 2009, I contacted the Ripoff Report office using the telephone number listed on its Web site [602-359-4357]. I was taken through a series of voice prompts which eventually led me to someone who identified himself as the “ED”itor. The speaker immediately inquired into the size and profitability of my business. Based on my recollection, the speaker asked, among other things, whether my company was internationally based, the size of my company, and how we were making money. I responded that AEI is an American company that has been shut down by the accusations posted on his Web site. Later in our conversation, he boasted that Ripoff Report was at the top of all the search engines. The call was disconnected immediately thereafter. As reflected in the recording and transcript of Call #1, DSOF ¶ 56, the actual discussion that took place bears no resemblance whatsoever to Mr. Mobrez’s description of the call Ed Magedson: Mr. Mobrez: Mr. Magedson: Mr. Mobrez: Mr. Magedson: What’s the -This is Raymond. I am at the Asia Economic Institute. The what? Asia Economic Institute. I can’t understand a word you’re saying. What are you saying? Mr. Mobrez: Mr. Magedson: Mr. Mobrez: Mr. Magedson: I apologize. [Slowly] Asia Economic Institute. [Slowly] Asia Economic Institute? Yes sir. Okay, are you calling from Asia?

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Mr. Mobrez: Mr. Magedson: Mr. Mobrez:

No, I’m calling from Los Angeles office. Okay. How can I help you? Well, the issue is just we been reported with your website, and then I’m trying to find out how we resolve this issue, how can we -- what can I do here?

Mr. Magedson:

You need to send us an e-mail, and we can send you the options. We can’t discuss that by phone.

Mr. Mobrez: Mr. Magedson: Mr. Mobrez: Mr. Magedson:

Oh, I see. Where do I send it? You click on ‘Contact Us’ down at the bottom of the page. Bottom of the page, okay. And you tell us of the situation. Just try to make it short and brief. Okay?

Mr. Mobrez: Mr. Magedson: Mr. Mobrez: DOSF ¶ 56.

Say it again. Other than that, thank you for calling. [Hangs up phone] Hello? Oh.

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Like the first call, the transcripts of the other calls bear virtually no These

similarity to any of the allegations contained in Mr. Mobrez’s declaration.

transcripts (see DSOF ¶¶ 56–62) clearly show that Mr. Magedson never asked for money, never bragged about Ripoff Report’s immunity, and never offered to enroll AEI in the CAP program. All of these allegations are inflammatory lies concocted by Mr. Mobrez. A. Facts Relating to CDA Immunity

As explained below, because Plaintiffs’ factual allegations of extortion are demonstrably false, those claims fail on the merits and summary judgment is appropriate as to those claims for that reason alone. However, to the extent that any of Plaintiffs’ claims (including their RICO claims) are dependent upon treating Defendants as the “speaker” or “publisher” of any negative posts about AEI, Mr. Mobrez, or Ms. Llaneras, these claims are barred by the Communications Decency Act, 47 U.S.C. § 230(c)(1). As such a short recitation of facts material to the CDA are necessary. 9 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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First, as of May 2010, there are six reports about AEI on the Ripoff Report site. DOSF ¶ 63. All of these reports were created by third parties, not by Defendants. DOSF ¶ 64. Before they appeared on the site, each report about AEI was reviewed by one of Xcentric’s staff of content monitors. DOSF ¶ 65. Xcentric’s servers automatically record the name of each content monitor who reviews a post made to the site. DOSF ¶ 66. Each content monitor who reviewed the posts about AEI has testified that no

changes, additions, or deletions were made to any of these reports, nor were any changes, additions or deletions made to the comments/rebuttals. DOSF ¶ 67. The text of each report and each comment/rebuttal originated entirely with the third party author. DOSF ¶ 68. When an author submits a report to the Ripoff Report site, they are presented with a series of blank forms that help them to construct their report. DOSF ¶ 69. The forms ask the author for basic information such as the name of the person or company they want to write about, and the address and phone number of the company at issue. DOSF ¶ 70. During this process, the author is asked to prepare a title for their report by entering data into four boxes. The first box asks for the name of the company being reported, the second box asks for “descriptive words” explaining what the report is about, the third box asks for the city, and the fourth box asks for the state. DOSF ¶ 71. During this process, the site explains “The title of your report is divided into four boxes below but will appear as one line after your report is submitted.” DOSF ¶ 72. The site also shows the author a sample of how the report title would appear based on the data they have entered. DOSF ¶ 73. The author is also asked to select a topic and category for their report. DOSF ¶ 74. The list of topics and categories includes hundreds of choices some of which are entirely benign (i.e., electronics) while some are more critical (i.e., Unusual Rip-Off). DOSF ¶ 75. Xcentric does not make any suggestion as to what topic or category an author should select. DOSF ¶ 76. At the screen where the actual report text is entered, the author is presented with a blank box. DOSF ¶ 77. Xcentric makes no suggestion as to what the author should say 10 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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other than offering generic comments about style such as “DO NOT use ALL CAPITAL LETTERS, it makes it hard to read.” DOSF ¶ 78. Before the author is allowed to submit their report, they are required to review and agree to certain terms which state, among other things, “By posting this report/rebuttal, I attest this report is valid.” The author must also separately agree to Xcentric’s Terms of Service which state, among other things, “You will NOT post on ROR any defamatory, inaccurate, abusive, obscene, profane, offensive, threatening, harassing, racially offensive, or illegal material, or any material that infringes or violates another party's rights.” DOSF ¶ 79. When a report is finally submitted to the site, Xcentric’s servers automatically combine the unique text supplied by the author with various HTML code that is generic to every page on the site. DOSF ¶ 80. During this process and using keywords supplied by the author (such as the name of the company being reported), Xcentric’s servers automatically create “meta tags” which are used by search engines to index the contents of the specific page at issue. DOSF ¶ 81. The meta tags for each page are not normally visible to viewers, but they can be seen by individuals with basic technical knowledge who choose to view the actual HTML code for a report’s webpage. DOSF ¶ 82. The term “Ripoff Report” is a federally registered trademark used to identify the website www.RipoffReport.com. DOSF ¶ 83. Every report page on the Ripoff Report site includes meta tags based on unique keywords supplied from the author such as the name of the company involved and other words used by the author to create the title for their report. DOSF ¶ 84. Xcentric’s servers also automatically include three different keywords—rip-off, ripoff, rip off—into the meta tags of every page on the site. DOSF ¶ 85. Again, these words are NOT visible in the title or body of any particular report; they are simply indexing references used by search engines in order to accurately reflect the source of the indexed page. DOSF ¶ 86. If the keywords “rip-off, ripoff, rip off” were removed from the meta tags for each report page, the page would appear physically unchanged to anyone viewing it. DOSF ¶ 87. 11 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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III.

ARGUMENT A. Plaintiffs Have Lied About Being Extorted

Considering the evidence above, summary judgment is clearly appropriate as to Plaintiffs’ claims of RICO/extortion for one simple reason—the undisputed evidence shows that Plaintiffs have lied and that their extortion claims are factually false. It is undisputed that Mr. Magedson never asked Mr. Mobrez for any money, never promised to make negative information “go away”, and never made any threats of any kind whatsoever. All of these allegations are patently fictional and false. As such, no

reasonable jury could possibly find in favor of Plaintiffs on these claims. Defendants are fully aware that summary judgment normally cannot be granted when the evidence is conflicting, and Defendants recognize that Plaintiffs may seek to avoid summary judgment by denying their dishonesty or attempting to convince the court of some metaphysical evidentiary doubt in an effort to show a triable factual dispute. Even if this occurs, ample law supports granting summary judgment in this situation. For instance, in Scott v. Harris, 550 U.S. 372, 127 S.Ct. 1769 (2007), the U.S. Supreme Court was asked to consider the lower court’s denial of summary judgment to the defendant in a case arising from a police chase in which the fleeing suspect’s car was forced off the road by police, rendering the suspect a quadriplegic. See Scott, 550 U.S. at 374–76, 127 S.Ct. at 1773. The basic issue in the case was whether the defendant (a police officer who was chasing the fleeing plaintiff) was entitled to qualified immunity for his actions. Ultimately, the disposition of that issue turned on whether the suspect was driving so dangerously that deadly force was justified to stop him. The trial court held that summary judgment in favor of the police officer was inappropriate because the plaintiff claimed that he had been driving safely, slowing for turns, using his turn signals, and otherwise not acting so recklessly that deadly force was justified. See 550 U.S. at 374–76, 127 S.Ct. at 1773. Based on this argument, the trial court held “there are material issues of fact on which the issue of qualified immunity turns which present sufficient disagreement to require submission to a jury.” Id. at 376 12 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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(quoting Harris v. Coweta County, No. 3:01-CV-148-WBH, 2003 WL 25419527 (N.D.Ga. Sept. 23, 2003)). Following an interlocutory appeal of the qualified immunity issue, the Eleventh Circuit affirmed the denial of summary judgment. The Supreme Court granted certiorari and reversed, finding that despite the alleged evidentiary conflicts, the police offer was entitled to summary judgment on the issue of qualified immunity. See 550 U.S. at 376, 127 S.Ct. at 1774. This decision was based on the presence of a unique item of evidence—a videotape from the officer’s dashboard mounted video camera showing the actual chase from his perspective. Even though the fleeing suspect claimed that he was not driving recklessly, the Supreme Court rejected his testimony because, “[t]he videotape tells quite a different story … . Far from being the cautious and controlled driver the lower court depicts, what we see on the video more closely resembles a Hollywood-style car chase of the most frightening sort, placing police officers and innocent bystanders alike at great risk of serious injury.” Id. at 379–80, 127 S.Ct. at 1775–76. Based on the facts shown on the video, the Supreme Court found that summary judgment was proper because “Respondent’s version of events is so utterly discredited by the record that no reasonable jury could have believed him.” Id. at 380, 127 S.Ct. at 1776 (emphasis added). The same is true here. Before they knew that the calls between Mr. Mobrez and Mr. Magedson were recorded, Plaintiffs concocted their phony extortion claims in this case in an effort to falsely smear and malign Defendants. As the Supreme Court held in Scott, Plaintiffs’ testimony cannot defeat summary judgment because the six recorded telephone calls (two of which were voicemails left by Mr. Mobrez)4 are so totally and completely inconsistent with Plaintiffs’ versions of the facts that no reasonable juror could possibly believe Mr. Mobrez and his wife. Of course, the recordings are not the only evidence as to this issue. Among other things, Mr. Mobrez’s own telephone bills completely corroborate the dates, times, and length of each call, and importantly these Interestingly, Mr. Mobrez’s May 3, 2010 declaration never mentions any voicemails left for Mr. Magedson, though the recordings prove two voicemails were left by Mr. Mobrez. 13 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW
4

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bills also establish something else—that no other calls were made. Furthermore, Mr. Magedson affirms that the recordings are entirely accurate and he flatly denies ever asking Mr. Mobrez for money or discussing the Corporate Advocacy Program with him in any detail except to say that he (Magedson) would not discuss the program over the phone. Given this overwhelming evidence, any unsupported assertion that the tapes are not what they appear to be is simply untenable and insufficient to defeat summary judgment. See FTC v. Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009) (noting, “A nonmovant’s bald assertions or a mere scintilla of evidence are both insufficient to withstand summary judgment.”) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986); Galen v. County of Los Angeles, 477 F.3d 652, 658 (9th Cir. 2007)). Because the undisputed facts show that Plaintiffs have lied and that they were never extorted by Defendants, summary judgment should be granted in favor of Defendants as to both of Plaintiffs’ RICO claims. B. AEI Lacks RICO Standing

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Entirely separate and apart from the issue of the audio recordings, Plaintiffs’ RICO claims also fail because Plaintiffs lack standing under RICO. Put simply, in order to have standing to bring a RICO action, a plaintiff is required to prove, inter alia, “(1) that his alleged harm qualifies as injury to his business or property; and (2) that his harm was “by reason of” the RICO violation, which requires the plaintiff to establish proximate causation.” Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 2008) (citing Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)). Here, the undisputed facts show that Plaintiffs have no evidence whatsoever as to these mandatory criteria for at least three reasons. Specifically—1.) there is no evidence that Plaintiffs were harmed by a “pattern” of racketeering; 2.) Plaintiffs have no evidence of causation OR damages; and 3.) to the extent plaintiffs are seeking to recover harm to 14 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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their reputation under RICO, such damages are unavailable as a matter of law. Each point is discussed in turn below. 1. There Is No Evidence That Plaintiffs Were Harmed By A “Pattern” Of Racketeering Activity

Civil and criminal RICO cases share four common elements: 1.) conduct 2.) of an enterprise 3.) through a pattern 4.) of racketeering activity. See 18 U.S.C. § 1962; Sun Savings and Loan Ass'n v. Dierdorff, 825 F.2d 187, 191 (9th Cir. 1987). The phrase

‘pattern of racketeering activity’ is defined in 18 U.S.C. § 1961 requiring “at least two acts of racketeering activity … .” Here, ¶ 64 Plaintiffs’ Complaint makes only a cursory allegation that the emails between the parties and the calls from Mr. Mobrez to Mr. Magedson about the CAP program qualify as “several predicate acts” sufficient to demonstrate the pattern required under RICO. This position is wrong as a matter of law because “multiple acts in furtherance of a single extortion episode constitute only a single predicate act of attempted extortion, not a pattern of two or more predicate acts.” Maddaloni Jewelers, Inc. v. Rolex Watch U.S.A, Inc., 354 S.Supp.2d 294 (S.D.N.Y. 2004) (quoting Linens of Europe, Inc. v. Best Manufacturing, Inc., 2004 WL 2071689, *16 (S.D.N.Y. 2004) (citing McLaughlin v. Anderson, 962 F.2d 187, 194 (2nd Cir. 1992); Tellis v. United States Fidelity & Guaranty Co., 826 F.2d 477, 478 (7th Cir. 1986)). Here, the undisputed evidence shows that Plaintiffs were never the victims of even a single act or extortion, much less two or more acts needed to demonstrate the pattern required by RICO. Indeed, even accepting their fabricated version of the facts as true, the conversations between Mr. Mobrez and Mr. Magedson were nothing more than an ongoing discussion in furtherance of a single event. Because Plaintiffs cannot show they were harmed by a pattern of racketeering, their RICO claims fail as a matter of law. 2. Plaintiffs Have No Evidence Of RICO Damages

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Unlike their criminal counterparts, civil RICO cases contain a so-called “fifth element”—damages. As explained in the statutory text itself, damages are a mandatory element of a civil RICO claim; “Any person injured in his business or property by reason 15 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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of a violation of section 1962 of this chapter may sue therefore in any appropriate United States district court and shall recover threefold the damages he sustains … .” 18 U.S.C. § 1964(c) (emphasis added). In order to satisfy the damages requirement of a civil RICO claim, “a plaintiff must … show that the defendant caused injury to his business or property.” Fireman’s Fund Ins. Co. v. Stites, 258 F.3d 1016, 1021 (9th Cir. 2001). The failure to prove damages/harm to a plaintiff’s business or property is fatal to a civil RICO claim; “Without a harm to a specific business or property interest—a categorical inquiry typically determined by reference to state law—there is no injury to business or property within the meaning of RICO.” JM Martinac Shipbuilding Corp. v. Washington, 2010 WL 325950 (9th Cir. Jan. 29, 2010) (citing 18 U.S.C. § 1964(c)) (quoting Diaz v. Gates, 420 F.3d 897, 900 (9th Cir. 2005)). In fact, as the United States Supreme Court has explained, without proof of actual economic damages a plaintiff has no standing to sue under RICO: Conducting an enterprise that affects interstate commerce is obviously not in itself a violation of § 1962, nor is mere commission of the predicate offenses. In addition, the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation. As the Seventh Circuit has stated, “[a] defendant who violates section 1962 is not liable for treble damages to everyone he might have injured by other conduct, nor is the defendant liable to those who have not been injured.” Sedima, S.P.R.L. v. Imrex Company, Inc., 473 U.S. 479, 496–97, 105 S.Ct. 3275, 3285 (1985) (emphasis added) (quoting Haroco, Inc. v. American Nat’l Bank & Trust Co. of Chicago, 747 F.2d 384, 398 (7th Cir. 1984), aff'd, 473 U.S. 606, 105 S.Ct. 3291). Here, Plaintiffs’ RICO claims fail because they have no evidence whatsoever that they have suffered any damages to their “business or property” by virtue of the allegedly extortionate demands made by Mr. Magedson. As explained above, no extortion

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occurred here, but even assuming arguendo that it did, Plaintiffs still cannot recover under RICO absent proof that these predicate acts actually caused economic damage to them; “the plaintiff must show that he has suffered a concrete financial loss by 16 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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documenting the amount of damages to which he is entitled.” Fireman’s Fund, 258 F.3d at 1021 (emphasis added) (citing Forsyth v. Humana, Inc., 114 F.3d 1467, 1481 (9th Cir. 1997), aff'd. on other grounds, Humana, Inc. v. Forsyth, 525 U.S. 299, 119 S.Ct. 710, 142 L.Ed.2d 753 (1999)). Because it is undisputed that Plaintiffs cannot show any damages as a result of the alleged extortion, their RICO claims fail as a matter of law. As explained supra, it is an undisputed fact that Plaintiffs never joined the Corporate Advocacy Program. DSOF ¶ 88. It is also undisputed that during its nine

years in the “seminar” business, AEI never produced any seminars, never attempted to do so, and it never had any revenue or any profits of any kind. DSOF ¶¶ 8, 9. Because AEI literally never existed as a viable “business” despite nine years of trying (most of which occurred before any complaints appeared on the Ripoff Report), Plaintiffs cannot show that AEI suffered any harm as a result of anything said in the conversations between Mr. Magedson and Mr. Mobrez in April and May 2009. Standing alone, this fact requires the entry of summary judgment in favor of Defendants as to Plaintiffs’ RICO claims. 3. Reputational Damages Are Not Recoverable Under RICO

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Because it is so clear that Plaintiffs cannot establish any economic damage to AEI, it is expected they may try to argue that because some of the statements are defamatory per se, damage to their reputations may be presumed. Thus, Plaintiffs’ may argue their presumptive reputational loss is sufficient to provide standing under RICO. argument (if it is made) is wrong for two reasons. First, as a matter of law, damage to a person’s reputation is not “business or property” within the meaning of RICO, so harm arising from an alleged defamatory publication is simply unrecoverable under RICO. This was the precise holding in Padilla Rodriguez v. Llorens Quiñones, 813 F.Supp. 924 (D.Puerto Rico 1993) which involved a dispute between the plaintiff (a superior court judge) and the defendant (a local district attorney). According to the complaint, the defendant devised a plan to destroy the plaintiff’s reputation so he could take over the plaintiff’s judgeship. See Padilla This

Rodriguez, 813 F.Supp. at 925–26. The plan included a variety of attacks including the 17 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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publication of defamatory statements accusing the judge of being “corrupt” and engaging in wrongdoing. See id. The district court held that RICO’s statutory text limits a plaintiff’s recovery to harm to their “business or property”. Because the primary harm alleged was reputational, the court found that any such damages could not be recovered under RICO: In endeavoring to determine whether an injury to reputation is an injury to business or property under Section 1964(c), or, alternatively, is more akin to personal injury, it is essential to keep in mind RICO’s specific purpose to thwart the criminal invasion and acquisition of legitimate business enterprises and property. The plaintiffs in this case are alleging nothing remotely resembling such an invasion or acquisition. The damages which they claim are no more than injuries which flow from the negative articles published by the newspaper defendants. Primary among these alleged damages is the plaintiffs’ loss of reputation. Id. at 928 (emphasis added). Because reputational harm is simply not within the scope of the RICO statute, the court concluded, “damages relating to injury to reputation are personal injuries not recoverable under RICO.” Id. (emphasis added). As noted in the Padilla Rodriguez case, other courts have reached similar results. See Grogan v. Platt, 835 F.2d 844, 846 (11th Cir. 1988) (holding Congress did not intend to allow recovery under RICO for personal injury damages arising from wrongful death, assault and battery, and negligence); Bennett v. Centerpoint Bank, 761 F.Supp. 908, 916 (D.N.H.), aff'd without op., 953 F.2d 634 (1st Cir. 1991) (finding fear for one’s personal safety after receiving a threatening telephone call is not an injury to business or property as required by Section 1964(c)); Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1169–70 (3rd Cir. 1987) (damages for emotional distress are not recoverable under RICO). Second, even if reputational damages could theoretically be recovered under RICO, Plaintiffs could not succeed on such a theory here because there is no causal connection between the alleged predicate acts (apparently extortion and wire fraud) and the harm to their reputations arising from the postings made by third parties on the Ripoff Report. See Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461, 126 S.Ct. 1991, 1998 18 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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(2006) (explaining, “When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff’s injuries.”) In other words, even if Plaintiffs’ reputations were harmed, that harm was not caused by Defendants’ after-the-fact acts of “attempted extortion”. Rather, this harm was caused by the third party authors who posted the reports about them in the first place. As such, it is simply not possible for Plaintiffs to show that the predicate RICO acts (asking Plaintiffs for money to “remedy” negative statements by posting positive information) was the direct cause of harm resulting from those statements. This

conclusion is demonstrated by an obvious point—the posts at issue began in January 2009, before Mr. Mobrez called Mr. Magedson in April and May 2009. Thus, even if the telephone conversations between Mr. Mobrez and Mr. Magedson never happened and thus no attempted extortion took place, the harm to Plaintiffs would be exactly the same. The negative postings would still exist on the Ripoff Report site and they still would have caused the exact same damage to Plaintiffs’ reputation. Under such facts, there is no legitimate reason to allow Plaintiffs to pursue a RICO claim when their reputational damages (if any) can be fully compensated by other existing claims such as defamation. See Padilla Rodriguez, 813 F.Supp. at 929

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(explaining “[w]e discern no injustice in limiting a RICO plaintiff’s recovery for his personal injuries to ordinary non-RICO legal measures.”) (quoting Genty v. Resolution Trust Corp., 937 F.2d 899, 918 (3rd Cir. 1991)). C. Defendants Are Immune Under The Communications Decency Act

On pages 12–16 of their anti-SLAPP motion (Doc. # 9), Defendants explained that numerous state and federal courts have held that Xcentric and Mr. Magedson are immune from liability arising from third-party authored statements pursuant to the Communications Decency Act, 47 U.S.C. § 230(c)(1). See Whitney Information

Network, Inc. v. Xcentric Ventures, LLC, 2008 WL 450095 (M.D.Fla. 2008) (finding Xcentric and Magedson entitled to immunity under CDA); GW Equity, LLC v. Xcentric Ventures, LLC, 2009 WL 62173 (N.D.Tex. 2009) (same); Intellectual Art Multimedia, 19 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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Inc. v. Milewski, 2009 WL 2915273 (N.Y.Sup. Sept. 11, 2009); Global Royalties, Ltd. v. Xcentric Ventures, LLC, 544 F.Supp.2d 929, 932 (D.Ariz. 2008)5 (finding Xcentric and Magedson immune under the CDA). Because the material facts of this case are identical to the facts of each of the above matters, this court should reach the same conclusion and hold that Defendants are entitled to protection under the CDA. However, as was also explained in the anti-SLAPP motion, Defendants believe that Plaintiffs may ask this court to break away from these established rulings and hold that some unique aspect of this case shows that CDA immunity has been lost. Most

likely, before they were caught lying, Plaintiffs probably expected to rely heavily on the District Court’s decision in Hy Cite Corp. v. Badbusinessbureau.com, LLC, 418 F.Supp.2d 1142 (D.Ariz. 2005) (finding in the context of a 12(b)(6) motion, allegations that Defendants created defamatory material and then requested money to remove it stated a claim under RICO). Indeed, many of the key factual allegations set forth in Plaintiff’s Complaint here were copied verbatim from the Hy Cite decision. For instance, most of the facts stated in ¶ 22 of the Complaint are either direct quotes or paraphrases from Hy Cite. See Hy Cite, 418 F.Supp.2d at 1149. Again, if Plaintiffs try to analogize this case to Hy Cite, this argument would fail for several reasons. First, Mr. Mobrez and Ms. Llaneras have lied about being extorted; no such conduct ever occurred here. As such, the hypothetical premise of Hy Cite—that extortionate conduct may defeat CDA immunity—is inapplicable here because the undisputed facts show that AEI and Mr. Mobrez were never extorted. Second, the court’s decision in Hy Cite was a ruling on a Motion to Dismiss under Rule 12(b)(6). In that posture, the court was required to assume the plaintiff’s allegations were true even if no evidence existed to support those claims. Unlike the 12(b)(6)

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NOTE—there are two Global Royalties decisions. The first involved a 12(b)(6) Motion to Dismiss which was granted with leave to amend. See 2007 WL 2949002 (“Global Royalties I”). The second case involved the same motion which was granted without leave to amend, thus ending the case. See 544 F.Supp.2d 929 (“Global Royalties II”). 20 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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standard applied in Hy Cite, a Rule 56 Motion for Summary Judgment cannot be defeated by false or conclusory allegations which lack evidentiary support. Third, in Hy Cite, the plaintiffs alleged that Mr. Magedson personally wrote and created defamatory information and then demanded money to remove the content. Here, although the Complaint contains vague allegations suggesting that Mr. Magedson generally creates some content for the site, there is no allegation that he created the specific posts at issue here. Moreover, Mr. Mobrez admitted in his deposition that he had no evidence Defendants created or altered any of the postings about AEI. DSOF ¶ 89. As such, this case is simply not analogous to the decision in Hy Cite and therefore CDA immunity still exists. See Global Royalties, Ltd. v. Xcentric Ventures, LLC, 2007 WL 2949002, *3 (D.Ariz. 2007) (finding Hy Cite inapplicable to CDA analysis where plaintiff failed to allege or prove that Mr. Magedson created defamatory content). Put simply, all of Plaintiffs’ non-RICO claims seek to impose liability on Xcentric and Mr. Magedson for material created by a third party. This is exactly the scenario where the CDA is intended to apply, and it is exactly the scenario in which courts have unanimously held that the CDA does apply. The same is true even as to Plaintiffs’ RICO claims. While Plaintiffs have

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attempted to use their RICO claims to creatively (and fraudulently) plead-around the CDA, such nominal efforts do not change the substantive nature of their claims which, at their core, try to blame Xcentric for the republication of third party content. Such nominal efforts to avoid the CDA are unavailing because “a plaintiff cannot sue someone for publishing third-party content simply by changing the name of the theory … .” Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1102 (9th Cir. 2009) (emphasis added). Even assuming arguendo that Plaintiffs had not fabricated their extortion claims (which they did), and even assuming that Plaintiffs had evidence showing they have suffered real injury to their property or business (which they do not), their RICO claims still seek to assign unlimited civil liability to Xcentric for damages caused by one simple thing—the republication of third-party generated content. Of course, the decision to 21 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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publish or remove material is exactly the quintessential function of publishers which the CDA was intended to protect; “claims that seek to impose liability on a website operator as the speaker or publisher of third-party content--or to impose liability that is ‘merely a rephrasing of’ such speaker or publisher liability … are barred by the CDA … .” Goddard v. Google, Inc., 640 F.Supp.2d 1193, 1195 (N.D.Cal. 2009) (emphasis added) (quoting Barnes, 570 F.3d at 1106). As other courts have held, this type of imputed liability cannot defeat CDA immunity even when made in connection with a directly related criminal act. See Gibson v. Craigslist, Inc., 2009 WL 1704355, *3–4 (S.D.N.Y. June 15, 2009) (CDA barred claim against Craigslist for publishing an advertisement selling a third-party a handgun that was used to shoot the plaintiff); Doe v. MySpace, Inc., 474 F.Supp.2d 843 (W.D.Tex. 2007) (CDA barred claims against MySpace website for failing to protect plaintiff who was sexually assaulted by person who contacted her through MySpace). While no court has considered the precise question present in this case—e.g., whether an allegation of civil RICO arising from the Corporate Advocacy Program is sufficient to overcome CDA immunity as to other non-RICO claims arising from the publication of third party material—it is equally true that every court that has reviewed the CAP program has determined it is irrelevant to Defendants’ CDA immunity: The evidence demonstrates that Defendants have a “Corporate Advocacy Program,” in which, for a fee, Defendants will investigate “rip-off reports” targeting a company and draft and post rebuttals to a negative report. The Court does not find this makes Defendants “information content providers” under the CDA. Plaintiff cites no case law demonstrating that such conduct bars CDA immunity, and has not demonstrated that the “Corporate Advocacy Program” has played any role in this case. Like other courts to consider this issue, this Court does not find the “Corporate Advocacy Program” prohibits Defendants from immunity under the CDA. GW Equity, 2009 WL 62173, * 13 (emphasis added) (citing Global Royalties II, 544 F.Supp.2d at 932–33 (rejecting plaintiff’s argument that CAP made defendants responsible for the creation or development of all of the posts on their website); see also 22 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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Whitney, 2008 WL 450095, * 6 (finding CAP irrelevant to application of the CDA). Bearing in mind Plaintiffs never joined Defendants’ Corporate Advocacy Program, because Plaintiffs’ RICO and non-RICO claims all require this Court to treat Defendants as the publisher or speaker of material which was provided by a third party, as a matter of law those claims are barred by the CDA. D. Plaintiffs Have No Evidence To Support Their Non-RICO Claims

Although the issues presented above are dispositive as to every claim in this case, a few comments should be made as to why some of Plaintiffs’ other claims lack merit. For the most part, it should be noted that as the party with the burden of proof at trial, Plaintiffs are required to respond to this motion with admissible evidence that would be sufficient to entitle them to a judgment in their favor. Because Defendants have no burden of proof as to the affirmative elements of Plaintiffs’ claims, summary judgment may be granted in favor of Defendants based solely on a lack of evidence supporting Plaintiffs’ claims. See Farrakhan v. Gregoire, 590 F.3d 989, 1003 (9th Cir. 2010)

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(explaining, “When a moving party without the ultimate burden of persuasion at trial demonstrates that it is entitled to prevail as a matter of law by showing that the nonmoving party has not adduced sufficient evidence of an essential element to carry its ultimate burden of persuasion at trial, the moving party is entitled to summary judgment.”) (citing Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000); Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001)). 1. Plaintiffs Are Not Entitled To Restitution/Injunctive Relief Under Cal. Bus. & Prof. Code § 17200

The Second Cause of Action in the Complaint asserts a claim under Cal. Bus. & Prof. Code § 17200. The factual basis of this claim is not entirely clear. However, under Bus. & Prof. Code § 17200, the only remedies available to the plaintiffs are restitution and injunctive relief. See Bradstreet v. Wong, 161 Cal.App.4th 1440, 75 Cal.Rptr.3d 253 (1st DCA 2008) (noting “A UCL action [under Bus. & Prof. Code § 17200] is equitable in nature; damages cannot be recovered. Civil penalties may be assessed in public unfair 23 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW

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competition actions, but the law contains no criminal provisions. [U]nder the UCL, ‘[p]revailing plaintiffs are generally limited to injunctive relief and restitution.’”) (emphasis added) (quoting Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1144, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003)). Here, it is undisputed that Plaintiffs have paid no money whatsoever to Defendants, and it is undisputed that Defendants have earned no profit from the postings about AEI. Similarly, it is apparently that Plaintiffs’ manifest criminal wrongdoing and unclean hands would bar them from seeking any equitable relief such as an injunction. As such, it does not appear that Plaintiffs are entitled to any relief under § 17200 even if this claim was not barred by the CDA, which it plainly is. See Gentry v. eBay, Inc., 99 Cal.App.4th 816, 121 Cal.Rptr.2d 703 (4 DCA 2002) (holding claim under Cal. Bus. & Prof. Code § 17200 barred by CDA). 2. No Evidence Exists That Defendants Intentionally Interfered With Plaintiffs’ Economic Relations

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The Complaint contains three separate claims of economic interference (the eighth, ninth, and tenth causes of action). Each of these claims is based on the common allegation that Defendants either intentionally or negligently interfered with Plaintiffs’ existing and prospective relationships with its current or would-be employees. Compl. ¶¶ 93, 99, & 105. Even if these three claims were not barred by the CDA, which they are, the claims fail on the merits for two reasons. First, it is undisputed that neither Xcentric nor Mr. Magedson had any knowledge of Plaintiffs’ relationships with their employees at the time each report was posted. DSOF ¶ 90. Second, it is undisputed that at his deposition, Mr. Mobrez was unable to identify a single employee of AEI who quit as a result of any actions of Xcentric or Mr. Magedson. DSOF ¶ 91. In light of these undisputed facts, no evidence exists to support Plaintiffs’ economic interference claims. As such, summary judgment is appropriate and should be entered in favor of Defendants as to Plaintiffs’ eighth, ninth, and tenth causes of action. 24 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT CV10-01360 SVW See

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3.

No Evidence Of A Conspiracy Exists

Finally, the Complaint contains two conspiracy claims; one arising under RICO (18 U.S.C. § 1962(d)), and the other under common law. Defendants deny entering into any conspiracy with anyone and Mr. Mobrez admitted in his deposition that he had no evidence of any conspiracy between Defendants and any third parties. DSOF ¶ 91. As such, because Plaintiffs have no evidence to support this claim, Defendants are entitled to summary judgment on the conspiracy claims. IV. CONCLUSION

For the reasons stated above, Defendants’ Motion for Summary Judgment should be granted. DATED this 24th day of May 2010. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorneys for Defendants Ed Magedson and Xcentric Ventures, LLC

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CERTIFICATE OF SERVICE I hereby certify that on May 24, 2010 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: Ms. Lisa Borodkin, Esq. Mr. Daniel F. Blackert, Esq. Asia Economic Institute 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Attorneys for Plaintiffs

And a courtesy copy of the foregoing delivered to: Honorable Stephen V. Wilson U.S. District Judge

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Exhibit I

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ---

THE HONORABLE STEPHEN V. WILSON, U.S. DISTRICT JUDGE PRESIDING

) ) ) Plaintiffs, ) ) vs. ) ) ) XCENTRIC VENTURES, LLC, et al. ) ) Defendants. ) _______________________________)

ASIA ECONOMIC INSTITUTE, LLC, et al.,

No.

CV 10-1360-SVW

REPORTER'S TRANSCRIPT OF PROCEEDINGS LOS ANGELES, CALIFORNIA MONDAY, JULY 12, 2010

_____________________________________________________________ DEBORAH K. GACKLE, CSR, RPR United States Courthouse 312 North Spring Street, Room 402A Los Angeles, California 90012 (213) 620-1149

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

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APPEARANCES OF COUNSEL:

For the Plaintiff:

ASIA ECONOMIC INSTITUTE BY: LISA J. BORODKIN BY: DANIEL F. BLACKERT 11766 Wilshire Boulevard, Suite 260 Los Angeles, California 90025

For the Defendants:

LAW OFFICES OF DAVID S. GINGRAS BY: DAVID S. GINGRAS 4072 E. Mountain Vista Drive Phoenix, Arizona 85048 JABURG & WILK BY: MARIA CRIMI SPETH 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 602-248-1000 Fax: 602-248-0522 Email: mcs@jaburgwilk.com

- - - - -

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA COURT REPORTER DEBORAH K. GACKLE

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LOS ANGELES, CALIFORNIA; MONDAY, APRIL 19, 2010; 2:15 P.M. - - - - -

THE CLERK:

Item 11, CV 10-1360-SVW, Asia Economic

Institute, et al. versus Xcentric Ventures, LLC, et al. Counsel, please state your appearances. MS. BORODKIN: Good afternoon, Your Honor. Lisa

Borodkin for the plaintiffs. MR. BLACKERT: Good afternoon, Your Honor. Daniel

Blackert for the plaintiffs. MR. GINGRAS: Good afternoon, Your Honor. David

Gingras on behalf of defendants Xcentric Ventures, LLC, and Ed Magedson. MS. SPETH: Good afternoon, Your Honor. Maria Speth

on behalf of the defendants, as well. THE COURT: Let me ask first the plaintiff: The two

predicate acts that are in the complaint -- extortion and mail fraud -- the focus of this motion has been the extortion predicate act. The mail fraud -- strike that -- wire fraud has

been hardly referenced and certainly not described in any detail at all. Are you pursuing the wire fraud as a predicate act also? MS. BORODKIN: Your Honor, we are, and that was one

of the things we were hoping to request from you today due to

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recently discovered evidence, yes. THE COURT: correct? MS. BORODKIN: THE COURT: Correct. Answer my question. The answer is yes,

And so can you give me a description of

what the wire fraud allegation is, because obviously the complaint, if there had been a 9B -(Interruption in the proceedings.) THE COURT: Now, if there had been a Rule 9B motion

filed in this case, the Rule 9B motion would undoubtedly have been granted because wire fraud is the type of allegation that falls within Rule 9B, and there is no description. Can you tell me, at least orally, how you would deal with that if you were allowed to replead it, and I'll have to give you that opportunity, but I'm interested in your overview now. Tell me how you would replead, if given the opportunity. MS. BORODKIN: Your Honor, we would replead it by

stating with particularity specific times, places and speakers and recipients of representations to people that Ripoff reports are never taken down, that the statement was false, it was made with the intent to defraud the recipients of the statements into pursuing applications into the corporate advocacy program. THE COURT: Even if that were pled, how would that

constitute a fraud on the plaintiff? MS. BORODKIN: Because it's false that reports are

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never taken down, and -THE COURT: Let's say there was a false statement. How would that

There has to be causation, injury and so forth. all develop under your theory?

In other words, it seems that

the more likely type of allegation would be that these reports are taken down and then they weren't. Someone would say, Well,

look, I joined the corporate program or I paid the fee or whatever because of the representation that these defamatory allegations would be removed. Now you're saying -- you're not

saying that, you're saying that the fraud was -- that defendant said they would be never taken down. Where is the injury? MS. BORODKIN: Your Honor, I apologize. This is all

very recent that we discovered contradictory evidence in the record. Generally, the injury is that subjects of the Ripoff

reports may have declined to pursue certain avenues of relief that may been available to them had they known the true facts which are there are limited circumstances in which reports may be taken down, but they simply don't get that far because their representations on the websites and the correspondence. Defendants stated copiously there is only one way to address these reports. THE COURT: You're saying that the defendant says

these allegedly defamatory comments by third parties will never be removed, and you're saying that that is false because there

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is an instance that you allege in which arguably it was removed. So if you establish that that statement is false, how does that constitute wire fraud as to your client? In other

words, what would your client have done differently had that reputation been set forth truthfully? MS. BORODKIN: Your Honor, we appreciate what the The truth is there are a

court's trying to do and narrow this. whole host of -THE COURT:

Ma'am, here's what you have to do, and I Along the way

say that kindly, no indictment of you intended:

here between you and the defendant, you've created a horrible record to the point that the magistrate has been so upset that he called both of you uncivil and he's considering sanctions against both of you, and that can't persist. I can see where

some of the problem is because you're not listening to my question. You want to get your point across. You have to

listen to my question.

This is not a deposition office where You have to focus.

you can scream at each other as you have.

The question again is if the defendant had, in your view, said the truth that these defamatory statements will be taken down as opposed to never been taken down, how would that have defrauded your client? MS. BORODKIN: THE COURT: I'm sorry --

For argument's sake, I'm acknowledging or

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accepting for the moment that the statement wasn't true.

other words, I'm agreeing with you, just for argument's sake. How would that lead to a wire fraud against your client? What would your client have done differently? MS. BORODKIN: client. THE COURT: See, that's the problem, ma'am. This is, Your Honor, perhaps I'd have to ask my

in my view, pretty -- I'm looking for a word that is not pejorative that still makes the point -- pretty unacceptable lawyering because under Rule 11 you've now admitted to a Rule 11 violation. You filed a wire fraud allegation as a As you stand at the lectern, you

predicate act for your RICO.

can't even, in a best-world sense, articulate a wire fraud. You now say you have to speak to your client. The rules

clearly say that you have to have a good-faith basis for alleging something in a complaint, and how could you have had a good-faith basis without speaking to your client and now being totally unable to articulate a basis? MS. BORODKIN: Your Honor, with all do respect, I was Would you

not counsel of record when the complaint was filed.

like to inquire as to the attorney who did prepare and file those papers? THE COURT: May be. I mean it may very well be that On

that person is the person that has to be called to answer. the other hand, I'm not so sure that the reach of Rule 11

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doesn't extend to someone who takes over a case, especially when the case has reached motion practice, but I'll leave that aside for the moment. Okay. matters. Let's leave that aside for the moment.

Now, I just want to review with you certain

The magistrate judge gave you an hour and a half of

additional time to take the deposition of defendant Magedson. MR. GINGRAS: THE COURT: Magedson. And forgetting for the moment

Magedson.

that there's been some inability -- for lack of a better word -- for the parties to find a time and place, one of the matters that you want to -- the three matters that I can see that you want to inquire further of Magedson are the number of persons enrolled in the category program, correct? of them? MS. BORODKIN: THE COURT: Correct, Your Honor. Is that one

One of the three.

Then you want information about Magedson's cell phone and whether he uses his cell phone to conduct business. the second matter. MS. BORODKIN: Your Honor, to be more specific, we That's

would like to continue the line of questioning that was commenced when we started to discuss the cell phones. state that he uses his cell phone for business. THE COURT: I see. He did

And then you want to question him about whether any

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positive material is ever posted on the Ripoff Report website, correct? MS. BORODKIN: Again, to be perfectly clear, he did We

testify that positive reports are permitted to be posted.

wanted to inquire further as to the nature of those reports, if there was anything other than a rebuttal. THE COURT: I see. Those are the three matters that

you want to inquire further of in the hour-and-a-half deposition. MS. BORODKIN: There are those and also, in

particular, we wanted to understand further steps such as the second questionnaire that Mr. Magedson testified to and the cap agreement that he testified to. THE COURT: the matters. I see. With regard to this -- those are

Thank you for summarizing them.

Now, with regard to this questionnaire, aside from the deposition, the plaintiff also wants to see that questionnaire. You've described the questionnaire, but I've

never seen the questionnaire. Do you have the questionnaire with you? MR. GINGRAS: THE COURT: plaintiff? MR. GINGRAS: Well, we'd be happy to, Your Honor, if I do not, Your Honor.

Well, why haven't you shown it to the

it was relevant to any of the --

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THE COURT:

I didn't ask you.

I want you to -- now,

the questionnaire, was the questionnaire given to the plaintiff? MR. GINGRAS: THE COURT: plaintiff? MS. BORODKIN: THE COURT: No, Your Honor. In any event, I want the No.

Was the questionnaire given to the

I see.

questionnaire submitted.

Thank you.

Now, actually two documents, something called a second questionnaire and a cap agreement, were either of those given to the plaintiff? MR. GINGRAS: THE COURT: They were not, Your Honor.

Then I wanted to give the plaintiff an In your papers, you, the plaintiff,

opportunity to -- yes.

cited, and seemed to rely heavily on, a case captioned Monex v. Gilliam reported at 680 F.Supp. 2nd 1148. I have considered that case. case that you cited. That was the principal

Interestingly, your opponent didn't cite

any extortion cases so, the only case that has been brought to my attention in these pleadings is the case that you have relied on. Is there anything that you want to tell me beyond what you've already described as to the significance of that case? I have considered the case. I'm just asking whether

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there is something about that case beyond what you prescribed and what I've read. considered it. Clearly it's an extortion case, and I've

You don't have to respond; I'm just giving you

the opportunity. MS. BORODKIN: the -THE COURT: The only case that either side -It's not. Flatley was cited and Your Honor, you're correct. That is

MS. BORODKIN:

discussed in our opposition to the motion to strike. THE COURT: you. Let me ask you this -- all right. Anything else? Just the five things we were asking Thank

You may be seated. MS. BORODKIN:

for today in the terms of relief -THE COURT: Thank you very much. You may be seated.

The motion for summary judgment as to the extortion claim is granted. The -- and I'll issue an order.

Will you be making a Rule 9B motion? MR. GINGRAS: Your Honor, I'd probably prefer to see When you

the court's order before I make that determination.

said "extortion," I'm not sure if you refer to the RICO claim or extortion as simply one of the predicate acts to that claim. I think that makes a difference in terms of whether there is a RICO claim -THE COURT: With all due expect, sir, what you just

said didn't come together because all it takes is, in RICO, is

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a pattern of racketeering activity which is described in terms of specific predicate acts. Wire fraud is a predicate act;

extortion is a predicate act. Now, by granting the extortion predicate claim, that means that the only basis for a RICO case would be wire fraud, and of course it would require more than just an act of wire fraud. It would require a pattern and all the other I note -- just one moment -- let me just turn

prerequisites.

to another case for a second. (Unrelated matter, not transcribed herein) THE COURT: That means that if the plaintiff can

prove a pattern of racketeering activity through wire fraud, then arguably if the other prerequisites of RICO are met, namely, enterprise, causation, injury, they have a claim. So what I am saying is that under RICO law, even though RICO itself doesn't have to be the subject of the heightened pleading requirement under Rule 9B, if a predicate act under RICO is subject to a heightened pleading requirement such as in this case, wire fraud, then it has to be done; and I'm just trying to be efficient about it. not withstand a Rule 9B motion. You don't have to make a Rule 9B motion, but if you did make one, it undoubtedly would be granted and it would compel the plaintiff to plead if they could with particularity. Then you could make a motion to dismiss, which would be ruled This complaint would

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upon.

If motion were denied, then we would proceed to

discovery. And so while in light of what I've said earlier, a further deposition of Magedson is not required. If the

plaintiff were able to sustain a pattern of racketeering activity as to wire fraud, I would allow Magedson to be deposed and for more than the hour and a half if they got into wire fraud because that would be a new ball game. So rather than have you make a motion and have it responded to, the complaint is so patently deficient, I would -- if you made a motion, give the plaintiff -- grant the motion, allow the plaintiff an opportunity to replead. Do you have such a motion? MR. GINGRAS: THE COURT: I would, Your Honor.

Then your motion is granted. Your Honor, if I could be heard on

MS. BORODKIN: that. THE COURT:

Yes.

What do you want to be heard about?

MS. BORODKIN: a RICO case statement -THE COURT:

On the motion to strike, you asked for

I'm not -- ma'am, I don't think you're This is very distressing. I think you're

listening to what is going on.

There was nothing about a RICO case statement. not following the colloquy.

We're focused on the pleading of I said nothing about a RICO

the wire fraud as a predicate act.

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case statement; I've not ordered a RICO case statement. MS. BORODKIN: THE COURT: I apologize.

Yes, please.

I'll grant the motion without prejudice, and how much time would you need to replead the RICO case? You could

replead it the same way except you would have to articulate within Rule 9B the wire fraud. How much time would you need, sir? MR. BLACKERT: appropriate? THE COURT: Two weeks. Thank you, Your Honor. About two weeks, Your Honor. Is that

MR. BLACKERT: THE COURT: until then.

The case remains in its bifurcated state

In other words, the RICO is bifurcated from the

other claims. And the other ruling I will make is this: That in Thank

light of the lack of jury demand, it is a court trial. you.

Then I'll set -- assuming that two weeks from now the

complaint is refiled, I'll give you 10 days thereafter to make a motion if you wish to dismiss, and if you don't make a motion to dismiss, notify us so you can begin your discovery. And then set up a hearing date, Paul, or schedule in light of that. We can do that in a minute order. minute order. We'll send you a

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MR. GINGRAS: THE COURT:

Your Honor --

I don't want to hear any more. I'm sorry. - - - - - -

MR. GINGRAS:

C E R T I F I C A T E

I hereby certify that the foregoing is a true and correct transcript from the stenographic record of the proceedings in the foregoing matter.

July 29, 2010 __________________________ Deborah K. Gackle Official Court Reporter CSR No. 7106 ___________________ Date

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Exhibit J

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Daniel F. Blackert, (SBN 255021) blackertesq@yahoo.com Lisa J. Borodkin, (SBN 196412) lisa_borodkin@post.harvard.edu ASIA ECONOMIC INSTITUTE, LLC 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Telephone (310) 806-3000 Facsimile (310) 826-4448 Attorneys for Plaintiffs Asia Economic Institute, LLC, Raymond Mobrez, and Iliana Llaneras UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ) Case No.: 2:10-cv-01360-SVW-PJW ) ) ) FIRST AMENDED COMPLAINT FOR: ) ) ) (1) VIOLATION OF 18 U.S.C. § 1962(c) -) CIVIL RICO ) Plaintiffs, ) (2) VIOLATION OF 18 U.S.C. § 1962(d) -) vs. RICO CONSPIRACY ) (3) UNFAIR BUSINESS PRACTICES -) XCENTRIC VENTURES, LLC, ) CAL. BUS. & PROF. CODE § 17200 et ) an Arizona LLC, doing business seq. ) as BADBUSINESS BUREAU, ) (4) DEFAMATION ) (5) DEFAMATION PER SE RIPOFF REPORT, and ) (6) INTENTIONAL INTERFERENCE RIPOFFREPORT.COM, ) BAD BUSINESS BUREAU, ) WITH PROSPECTIVE ECONOMIC ) LLC, organized and existing RELATIONS ) under the laws of St. Kitts and ) (7) NEGLIGENT INTERFERENCE Nevis, West Indies; EDWARD ) WITH PROSPECTIVE ECONOMIC ) MAGEDSON an individual, also ) RELATIONS ) (8) NEGLIGENT INTERFERENCE known as EDWARD MAGIDSON also known as the ) WITH ECONOMIC RELATIONS ) “Editor,” and DOES 1 through ) (9) DECEIT ) (10) FRAUD 100, inclusive, ) )) (11) INJUNCTION ) Defendants. JURY TRIAL DEMANDED ASIA ECONOMIC INSTITUTE, LLC, a California LLC; RAYMOND MOBREZ an individual; and ILIANA LLANERAS, an individual,

First Amended Complaint - 1

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Plaintiffs Asia Economic Institute, LLC (“Asia Economic Institute” or “AEI”), Raymond Mobrez (“Mobrez”) and Iliana Llaneras (“Llaneras”) (collectively, “Plaintiffs”) complain of defendants Xcentric Ventures, LLC doing business as Ripoff Report, Bad Business Bureau, RipoffReport.com and BadbusinessBureau.com (“Xcentric”), Bad Business Bureau LLC (“Bad Business Bureau”) and Edward Magedson, also known as Ed Magedson, also known as Edward Magidson, also known as “the EDitor” (“Magedson”) (collectively, “Defendants”), and alleges as follows: I. JURISDICTION AND VENUE 2. This Court has jurisdiction of the subject matter of this action under

federal question jurisdiction, pursuant to 28 U.S.C. § 1331 and 18 U.S.C. § 1962 (c) and (d) (the Racketeering Influenced and Corrupt Organizations Act) (“RICO”), in that federal questions are alleged under 18 U.S.C. § 1962(c) and (d). Thus far, this Court has exercised supplemental jurisdiction over Plaintiffs’ state law claims pursuant to 28 U.S.C. § 1367. 3. This Court has personal jurisdiction over all Defendants pursuant to the RICO statute. Specifically 18 U.S.C. § 1965(a) and (d), which confers nationwide service of process authority upon this Court. In addition, this Court has personal jurisdiction over all Defendants because they have sufficient contacts with this judicial district and California to satisfy the “minimum contacts” doctrine articulated in International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Defendants (a) direct conduct at Plaintiffs, who maintain principal places of business in, and are domiciled in, this judicial district; and (b) operate a commercial, interactive website in this judicial district. 4. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391 because a substantial part of the events, acts and omissions giving rise to Plaintiffs’ claims occurred within this judicial district, and is also proper under 18 U.S.C. §
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1965(a) and (d) because all Defendants have transacted and presently transact their affairs in this judicial district. 5. Defendants have previously consented to and waived objections to II. THE PARTIES 6. Plaintiff Asia Economic Institute is a limited liability company and, at this Court’s jurisdiction and to venue within this judicial district.

all times relevant hereto, organized and existing pursuant to the laws of the State of California, and is authorized to do business in the State of California. Plaintiff Asia Economic Institute has its principal place of business at 11766 Wilshire Boulevard, Suite 260, Los Angeles, California 90025. 7. Plaintiff Mobrez is an individual and, at all times relevant hereto, a resident of Los Angeles, California, County of Los Angeles. Plaintiff Mobrez is a principal and manager of Asia Economic Institute, LLC. In addition, as a California-licensed broker, Mr. Mobrez derives a significant amount of revenue from brokering commercial real estate transactions. 8. Plaintiff Llaneras is an individual and, at all times relevant hereto, a resident of California, County of Los Angeles. Plaintiff Llaneras is a principal and manager of Asia Economic Institute, LLC. In addition, as a California-licensed broker, Ms. Llaneras derives a significant amount of revenue from brokering commercial real estate transactions. 9. Defendant Xcentric is a limited liability company organized and existing pursuant to the laws of the State of Arizona with its purported domestic address as P.O. Box 470, Phoenix, Arizona 85280. Plaintiffs are informed and believe and thereon allege that Xcentric is owned by a single member, Creative Business Investment Concepts, Inc., a Nevada corporation located at 2533 North Carson Street, Carson City, Nevada 89706. Defendant Xcentric transacts business in interstate commerce as, inter alia, “Ripoff Report,” an enterprise, located in this
First Amended Complaint - 3

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judicial district and elsewhere in California and Arizona, and employs, contracts with and engages individuals, partnerships and business entities, who share the common goals of perpetuating the goals and purpose of the Ripoff Report enterprise, pursuant to long-term relationships, drawing from the same pool of associates and spanning several years, from at least 2005 to the present, and sharing in the substantial financial and other benefits derived therefrom. 10. Plaintiffs are informed and believe and thereon allege that Xcentric operates or manages the Ripoff Report enterprise and substantially directs many of its activities and operations, including selling goods and services; acquiring exclusive, perpetual, world-wide copyrights in original text and graphical content about businesses, consumer goods and services, as well as the intimate personal lives of private individuals, in the form of “reports” (“Rip-off Reports” or “Reports”),1 “rebuttals” and “comments”; writing and producing original, paid, sponsored endorsements and testimonials of consumer businesses, goods and services – often substantially co-written by the subjects themselves – as “investigations” and “notices”; thereafter distributing, displaying, publishing, continuously republishing, indexing, and optimizing for the Web such acquired and paid, self-produced content to make the content interactive and easily searchable by commercial Internet search engines; advertising against such acquired and self-produced, paid content, deriving revenues based in part on demonstrated analytics including numbers of unique visitors, page views and ad clicks; attracting visitors to its website for the purpose of selling them goods and services, increasing its analytics, enhancing the website’s “authority” or “reputation” with Internet search engines, and soliciting additional content to add to its massive compilation of business, consumer and personal data; and creating, modifying, customizing or licensing software code, database architecture, network
For avoidance of confusion, Defendants’ business is referred to herein as “Ripoff Report”

1

while the reports themselves are referred to as “Rip-off Reports” or “Reports.”
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and computer programming. In operating or managing the Ripoff Report enterprise, Xcentric uses instrumentalities of interstate commerce, specifically wire, including through websites hosted at the domain names “ripoffreport.com,” “badbusinessbureau.com,” “ripoffreport.net” and “ripoffreport.org,” among others, all of which redirect to the Uniform Resource Locator (“URL”) for Defendants’ primary website, http://www.ripoffreport.com (the “ROR Website”, sometimes “ROR”) and self-hosted electronic mail services operated through the “ripoffreport.com” domain name. Plaintiffs are informed and believe and thereon allege that the domain names for the ROR Website and electronic mail services are registered by directNIC, located at West Bay, Grand Cayman, hosted by Intercosmos Media Group, Inc. with servers located in Ankara, Turkey, and directed, operated and controlled from Maricopa County, Arizona. 11. Plaintiffs are informed and believe and thereon allege that Defendant Bad Business Bureau is, or was at times relevant hereto, a limited liability company organized and existing pursuant to the laws of Saint Kitts or Nevis, West Indies. Defendant Bad Business Bureau is or was the predecessor to Xcentric in operating and managing the Ripoff Report enterprise and is or was otherwise associated with the Ripoff Report enterprise. 12. Defendant Edward Magedson, also known as Ed Magedson, also known as Edward Magidson, also known as “the EDitor (“Magedson”) is an individual and, at all times relevant hereto, a resident of the State of Arizona and/or the State of California and, by his own admission, represented himself at certain times relevant hereto as present in the State of California. Magedson is the Manager of Xcentric and Bad Business Bureau, the “Editor” of Ripoff Report and operates and manages activities of the Ripoff Report enterprise, including by, inter alia, making top-level policy, business, risk management, legal and strategy decisions, sometimes in consultation with outside counsel; operating and managing business conducted through the ROR Website; administering its Corporate Advocacy and Remediation Program; performing investigations of the veracity of
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the contents of certain reports; writing and publishing findings; collaborating with the subjects of paid testimonials and endorsements in writing original content about them and publishing it through the ROR Website; communicating with individual subjects of reports by electronic mail, particularly to urge them to file rebuttals or comments to existing Reports; supervising or acting in association with a currently unknown individual identified only by the electronic mail address “Karen@ripoffreport.com” at certain times relevant herein, whose duties included responding to complaints that rebuttals were not posting or were being posted to the wrong reports; engaging, supervising and collaborating with counsel to draft significant and influential portions of the ROR Website and otherwise. Magedson uses instrumentalities of interstate commerce to conduct these activities, specifically wire. 13. Xcentric and its associates in the Ripoff Report enterprise use extremely aggressive litigation strategies to, inter alia, protect and perpetuate its business model, and silence and retaliate against their critics, including by affirmatively initiating an Arizona state court action against Washington Statebased attorney and search engine optimization consultant and blogger Sarah L. Bird, Xcentric Ventures LLC v. Bird, (D. Ariz. 09-cv-1033) which action was dismissed on jurisdictional grounds and is currently on appeal to the Ninth Circuit Court of Appeals (10-1546); initiating an Arizona state court defamation action against Phoenix New Times reporter Sarah Fenske, her husband, a source for an article, the source’s spouse and the publishers, Xcentric v. Village Voice Media, CV2008-2416 (Arizona Sup. Ct. for Maricopa County); and is currently opposing an appeal to the Seventh Circuit (10-1167) in Blockowicz v. Williams, 675 F. Supp. 2d 912 (N.D. Ill. 2009) (09-cv-3955) regarding its purported right to defy compliance with a permanent injunction ordering it to remove defamatory content. 14. The Ripoff Report enterprise until approximately May or June 2010 had a regular business practice of secretly recording or causing to be recorded all telephone conversations to its business telephone number, in association with an
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unidentified vendor, without disclosure to or consent of all parties to the telephone conversations, in violation of, inter alia, the wiretapping laws of the State of California. The Ripoff Report has used or attempted to use the contents of such secret recordings as a surprise litigation tactic in actions in, inter alia, California and Arizona. Defendants used instrumentalities of interstate commerce, specifically wire, to record such telephone calls. 15. The true names and capacities, whether individual, corporate, or otherwise, of Defendants DOES 1 to 100 are unknown to Plaintiffs at the present time, who therefore sue such Defendants by fictitious names, and will amend this Complaint to show their true names and capacities when ascertained. Plaintiffs are informed and believe and thereon allege that each of the defendants assigned as a DOE is responsible in some manner for the events and happenings herein referred to, and thereby proximately caused injuries and damages to the Plaintiffs. Plaintiffs will amend this complaint to add as defendants in this action those individuals and entities who have assisted Defendants in perpetrating the acts and omissions complained of herein, including additional individuals and entities complicit in managing and operating the affairs of the Ripoff Report enterprise. III. SUMMARY OF THE ALLEGATIONS 16. The Ripoff Report enterprise takes advantage of the average person’s

lack of sophistication in technology, reliance on Internet search engines, and general lack of time. It misrepresents its true nature to the public and places its victims in desperate positions through elaborate technological and legal traps and artifices. It then intimidates and defrauds its victims into believing that the only practical way of saving their good names is to defend them on its home turf, the ROR Website, where it makes the rules, it decides who gets heard, and most of all,

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it makes money. Many do, not realizing until it is too late, that they are only aggravating their injuries and enriching Defendants by doing so. 17. The Ripoff Report enterprise is the ultimate Internet “troll.”2 It survives and earns revenues through a fraudulent scheme (the “Content Trolling Scheme”) by building a huge database of controversial content about other people and businesses (“victims” or “subjects”), which it then enhances for search engines and advertisers, often with additions from the victims themselves. The Ripoff Report enterprise runs the Content Trolling Scheme by tricking its victims through various misrepresentations of material fact conveyed through the ROR Website and in electronic mail, and otherwise furthered by use of the wires, into believing there is no legal redress for them in the courts, that the Reports will forever remain as a “Scarlet Letter” on their permanent records, and that their best available option is to file a rebuttal. 18. The Ripoff Report enterprise solicits purely negative, often hateful and extremely personal – and in many instances, judicially recognized as defamatory – content in the form of Rip-off Reports. The Ripoff Report enterprise acquires ownership of all content contributed through the ROR Website under an exclusive grant of copyright before it is ever published to the web. Before publishing Reports, the Ripoff Report enterprise conducts its own-pre-publication review, whereby it filters out the positive and publishes only the negative, sometimes redacting or disclaiming portions of the content, at times in a manner that significantly changes its meaning, and in certain cases (often under a financial arrangement) adds additional content that completely transforms or negates its meaning, or, for a fee, suppresses the Reports from publication altogether.

2

Wikipedia defines an Internet troll as “someone who posts inflammatory, extraneous, or off-

topic messages in an online community, such as an online discussion forum, chat room, or blog with the primary intent of provoking other users into a desired emotional response.”
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19.

Cloaked in the false disguise of a consumer advocate, the Ripoff

Report enterprise purports to advise the victims of the Content Trolling Scheme that the “best” thing they can do is to file a “free” rebuttal. Unbeknownst to the victims, the “free” rebuttals come at a cost. A rebuttal is likely to make the negative content in a Report go up in page rank in search engine queries, while doing nothing to alter the snippets of negative content that appear as search results. The Ripoff Report enterprise does not disclose its own financial self-interest in having victims file rebuttals –fresh content and page visits that make the ROR Website more attractive to search engines and online advertisers. The Ripoff Report enterprise does not disclose that some Reports do come down, and are materially altered or suppressed, for a price. Without knowing all this, the victims file rebuttals. The Ripoff Report enterprise then leads its victims down a path toward applying for the Corporate Advocacy Program, which promises to turn a negative into a positive, and seeking either exorbitant fees or tax returns and personal information, and conditioning acceptance in to the program on repeated “admissions of responsibility” more akin to the Salem Witch Trials or Spanish Inquisition than an outsourced customer satisfaction program. 20. The Ripoff Report enterprise even incorporates the Content Trolling Scheme into its recommended procedure for obtaining the identity of anonymous contributors of Reports. Citing a string of impressive-looking legal citations on its legal information page, the Ripoff Report enterprise insists, falsely, that the case of Mobilisa, Inc. v. Doe, 217 Ariz. 103, 110-11 (Ct. App. 2007) , requires that holders of a subpoena for author information “MUST post a notice as a rebuttal to each report for which you are seeking the author’s information,” as the only acceptable way of informing the anonymous author of the discovery request. This is a misrepresentation. The true facts are that Mobilisa states that the notice must be “via the same medium” used by the anonymous party to post the contested message, e.g., “if the message . . . was posted to an internet message board, the requesting party must make the notification via a posting to that same message
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board.” Id. Rebuttals on the ROR website lack certain important properties that Reports have, such as an automatic sharing, emailing button, and printing button. In fact, rebuttals are nearly impossible to print without taking the intermediate step of making a screen shot. Proper notice under Mobilisa would thus be posting of a new Report, perhaps in the category “notices.” Defendants could easily facilitate actual notice by forwarding an email. But by misinforming the public that Mobilisa requires a rebuttal as a precondition to proper notice, the Ripoff Report enterprise finds still another way to “feed the troll” that is, its content database. 21. By the time the victims realize that the best way of dealing with a Report may be to let it sink to the bottom over time, the damage has often been done. The victims have sat on their rights, business has evaporated, houses have gone into foreclosure, and the Reports have been pushed so far up in page rankings that it takes significant additional money and time to post alternative, positive content about themselves to the Web to undo the damage to their online reputations. 22. The Ripoff Report enterprise profusely claims that “Reports” never come down. But, for a price, the Ripoff Report enterprise will sell something even more valuable – the opportunity to change a negative Google search engine result into a positive. The Ripoff Report enterprise markets the Corporate Advocacy Program (“CAP”) to the subjects of Reports, typically after strongly urging them to file rebuttals. By joining CAP or otherwise making financial arrangements with the Ripoff Report enterprise, a subject can buy the privilege of essentially writing (or approving) her own Google search result. The CAP member writes or approves between 250 and 350 additional words of positive content that will be inserted into the body of a Report and also in a known strategic location in the HTML for the Report. 250 words is just the right amount of text to push the surrounding negative content so far down in the HTML as to be irrelevant to search engines. Thus, negative content virtually disappears from the Google search results for CAP members, replaced by the words approved by the CAP member. Because Google’s
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search algorithms are generally influenced to select text that “matches,” between both a web page and the corresponding HTML (that is, identical text that is present in both), putting the positive content in the strategic location in the HTML, along with a matching block of test in the Report effectively negates the harmful effect of the Report with the Google search engine, while allowing Defendants to continue claiming (falsely) that they “never remove Reports.” 23. There are at least two ways to get into CAP. One is to follow the application process, admit fault, sign away important legal rights, and pay exorbitant prices starting at thousands of dollars over a three-year period. The other way is to sue Defendants. In order to preserve the fiction that they “never lose a case” and that plaintiffs pay all their attorneys’ fees, the Ripoff Report enterprise sometimes settles difficult cases by channeling the plaintiffs into CAP or similar arrangements. 24. The Ripoff Report enterprise deceives consumers and violates Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 45 by providing paid endorsements and testimonials on the ROR Website without clearly disclosing the material considerations received for such paid endorsements and testimonials. The Ripoff Reports enterprise’s deceptive presentation of itself as “by consumers, for consumers,” failure to disclose receipt of consideration for specific endorsements, “Verified Safe” and other favorable contents, in violation of the FTC Act, and failure to disclose that part of its motivations for publishing Reports and seeking rebuttals are self-interested financial ones. This deliberate conduct proximately interferes with and causes damage to Plaintiffs’ economic relations and prospects, because these false impressions make the existence of a negative Report damning in search results, damning on its face and damning by negative implication.

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IV. FACTUAL ALLEGATIONS COMMON TO ALL CLAIMS A. Defendants’ Business and the ROR Website 25. Defendants Xcentric, Bad Business Bureau and Magedson, doing

business as “Bad Business Bureau” and “Ripoff Report,” together and in association with other individuals, partnerships and business entities, including employees, contractors, consultants, counsel, service providers and other participants, acting with a common purpose, pursuant to relationships among those associated with the Ripoff Report enterprise, with longevity sufficient to pursue the purposes of the Ripoff Report enterprise, operate and manage the affairs of the Ripoff Report enterprise, often through the ROR Website. 26. Defendants control other domain names that redirect visitors to the The Ripoff Report enterprise transacts a substantial ROR Website, including, inter alia, ripoffreport.net, ripoffreport.org, and badbusinessbureau.com. amount of its affairs through the domain name “ripoffreport.com,” both through the ROR Website and through electronic mail emanating from email addresses including 27. info@ripoffreport.com, Editor@ripoffreport.com and karen@ripoffreport.com. The Ripoff Report enterprise must be viewed for what it is – a selfinterested business model, not a disinterested consumer advocacy or consumerprotection, public service. The Ripoff Report enterprise is a for-profit business. The Ripoff Report enterprise earns revenues from the sale of goods and services and Web-based advertisements, which generate revenues based in part upon analytics including, Internet visitor traffic, page visits, page views, length of visit, number of clicks on advertisements and links, and link referrals to paid advertisements, whether under a revenue-sharing agreement or fee for advertising model.
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28.

The Ripoff Report enterprise uses instrumentalities of interstate

commerce, specifically wire, to further its purposes, including conducting the “Content Trolling Scheme” and other schemes that protect its revenues and power. 29. The Ripoff Report enterprise conducts its “trolling” on two levels. One is on the visible, superficial level of what it publishes on web pages at the ROR website, in the contents of the Reports, rebuttals, comments, advertisements and editorials. The Ripoff Report enterprise painstakingly frames any legal challenge to its practices solely as a challenge to its conduct on this first, visible, two-dimensional plane. 30. However, the true, three-dimensional space in which the Ripoff Report enterprise conducts its “trolling” for content, page views and visitors occurs on the level of the dynamic, semantic computer code that makes the first level of content searchable and interactive. For each web page comprising the ROR Website, there is an accompanying page of Hypertext Markup Language code (“HTML”). The HTML for a web page is responsible for generating what people see on their Internet browsers, influences how the page ranks with search engines, and influences what appears in the snippets of content displayed as search engine results, which is often the public’s first impression of any web page on the Internet. 31. The Ripoff Report enterprise determines not only what goes into web pages, but also what goes into the HTML, by design and continual improvement of its database, user interface and system architecture. 32. The Ripoff Report enterprise has designed its systems to generate web pages from content it acquires, and also the HTML for such web pages. Simply put, the web pages are written in plain, generally understandable English language, readily visible and comprehensible to a web visitor of ordinary sophistication. 33. The HTML for such web pages is written in dynamic, semantic computer code, using generally accepted elements that express intentions, ideas and conduct readily understandable to a person of moderate to advanced

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sophistication in HTML, but likely not visible, noticeable to a casual Google searcher making snap impressions based on a few search results. 34. The Ripoff Report enterprise knowingly, deliberately and with intent to deceive, exploits the gap between web pages and their respective HTML. The Ripoff Report enterprise has designed its servers and databases so that for ordinary Reports, the “matching” text in the body of the web page and the header of the HTML is generally negative, combined with the subject’s name as keywords. 35. However, for money, the Ripoff Report Enterprise will allow a subject to rewrite the “matching” portion of text that will be identical in the Report and in the HTML, and thus influencing Google to display a positive search result for the subject. 36. An advertising-supported Internet business model such as the Ripoff Report enterprise supports itself and earns revenues by attracting visitors to the content it publishes on the Web. As an advertising-supported business, the Ripoff Report enterprise must constantly acquire or generate content that will attract visitors. Therefore, like many Internet-based content publishers, the Ripoff Report enterprise aggressively solicits original content in the form of contributions or submissions and generates original content of its own, for publication and continual republication, for the purpose of advertising against it. 37. The ROR Website comprises over 500,000 unique web pages organized and hosted through the domain name ripoffreport.com and stored on servers owned or controlled by the Ripoff Report enterprise. The Ripoff Report enterprise copiously represents through the ROR Website, in electronic mail and in filings in the public records that it does not remove, depublish or delete content from its database. Therefore, the amassed stored content owned by the Ripoff Report enterprise is constantly increasing, thereby increasing the total number of web pages comprising the ROR website and associated database, and thereby increasing opportunities for attracting visitors to the ROR website to which it can

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serve advertisements, and in turn enhancing the various analytics that determine the advertising revenues that the Ripoff Report enterprise can earn. 38. The ROR Website gains so-called “authority,” or favorable page ranking, with Internet search engines based on a numbers of factors. These include the overall number of web pages, the quality of the content and links, the more fresh content it posts, the more often it is linked to, and the more frequently its content is updated, including by comments and “rebuttals.” 39. In addition to selling two-dimensional advertisements on its static web pages, Ripoff Report also sells links to paid advertisements in the body of the “rebuttals” that users post to its web pages. 40. Ripoff Reports offers programs such as the “Verified Safe” program, under the tagline “businesses you can trust!” and the “Corporate Advocacy Program,” described as a “Business Remediation and Consumer Satisfaction Program. . . . a long name for a program that does a lot for both the consumer and businesses alike.” 41. While the goals of consumer self-help, providing a place to report scams and rip-offs and generally exercising First Amendment-protected “pure expressive speech” rights are noble, Ripoff Report does much more, behind the scenes, that destroys livelihoods, reputations and businesses. B. 42. Rip-Off Reports and the ROR Website’s Terms of Service As part of the Content Trolling Scheme, the Ripoff Report enterprise

holds the ROR Website out to the public and in judicial tribunals as a consumer review website or public discussion forum. 43. Ripoff Report purports to serve the public as “by consumers, for consumers,” urging the public to contribute reports of “scams, consumer complaints, and frauds” under mottos such as “Let the truth be known!” These reports are referred to hereinafter as “Rip-off Reports” or “Reports.
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44. 45.

The ROR Website will not publish positive reviews. The only positive Not all Rip-off Reports are about companies with shady business

material that can be posted are rebuttals and comments. practices or individuals engaging in fraud or deceit. The ROR Website hosts, and has hosted “Rip-off Reports” concerning the deeply private details of the lives, habits and health conditions of individuals, including purported reports of individuals’ alleged “mental health” problems, attributing to individuals “sexually transmitted diseases,” “substance abuse” habits and other deeply personal, private details, along with names and home addresses. 46. The ROR Website differs from other community websites or public discussion forums in several unusual ways. Ripoff Report does not merely host the Rip-off Reports. Ripoff Report takes ownership of the copyright of every Report, rebuttal and user comment before it is even published to the Web, under the Copyright Act, 17 U.S.C. § 101. Thus, at the time of publication, Ripoff Report is the exclusive owner of all content that is posted to the ROR Website. 47. This is because, unlike community websites such as Facebook, Craigslist, and Roommates.com, Ripoff Report makes it mandatory for a user wishing to contribute content to the ROR Website to register and accept the ROR Website’s Terms of Service, which requires an automatic, exclusive grant of copyright in all user submissions to Ripoff Report before the user can contribute. 48. A true and correct copy of the ROR Website’s Terms of Service, as they existed on April 3, 2009 (and identical today with respect to Paragraph 6) are attached as Exhibit “1” and is incorporated herein by this reference. Paragraph 6 of the ROR Website’s Terms of Service provides that a user wishing to use the site grants Ripoff Report an irrevocable, perpetual, exclusive, world-wide license for certain rights exclusive to copyright holders, before they can post anything to a public area: “6. Proprietary Rights/Grant of Exclusive Rights

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3

By

posting

information

or

content

to

any

public

area

of

www.RipoffReport.com, you automatically grant, and you represent and warrant that you have the right to grant, to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute such information and content and to prepare derivative works of, or incorporate into other works, such information and content, and to grant and authorize sublicenses of the foregoing.” Exhibit 1, Paragraph 6. 49. Because the rights to copy, display, perform, and prepare derivative works are among the exclusive rights comprised in a copyright, and Paragraph 6 of the ROR Website’s Terms of Service is an exclusive license of these rights, Paragraph 6 of the ROR Website’s Terms of Service constitutes a “transfer of copyright ownership”3 with respect to all user contributions, under the Copyright Act, 17 U.S.C. § 101. 50. Because all user-generated submissions are screened (and sometimes altered) by Ripoff Report’s content monitors before they are posted to the ROR Website, and because copyrighted works are “created” when they are first fixed in any method that is sufficiently stable that they can be perceived, reproduced or communicated, under the definitions of the Copyright Act, 17 U.S.C. § 101, Ripoff Report has already acquired exclusive copyright ownership of all user-submitted content before it is published to the Web.

In “Definitions” of the Copyright Act, a “transfer of copyright ownership”

is defined as “an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license.” U.S.C. § 101.
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4

51.

Websites Facebook,4 Craigslist,5 Roommates.com6 and most

standard community websites only require users to agree to grant a non-exclusive license for user content. By contrast, Ripoff Report owns the perpetual, exclusive, worldwide copyright in and to every single item of content any user has contributed to the ROR Website, even before it is posted to the Web. 52. Moreover, unlike community forums such as Facebook or Craigslist, Ripoff Report embeds links into the contents of user-submitted material for paid advertisements for sometimes unrelated advertisers like “Cash4Gold.” C. ROR Website’s Rebuttal and Commenting System 53. Ripoff Report does not allow users to post positive Reports about a

business or individual on the ROR Website. Ripoff Report’s content monitors review Reports before they are posted to filter out those that say positive things about a business.

“you grant us a non-exclusive, transferable, sublicensable, royalty-free,

worldwide license to use any IP content that you post . . . This IP License ends when you delete your IP content or your account . . .” (Facebook Statement of Rights and Responsibilities Last Revision April 22, 2010)
5

“you automatically grant . . . to craigslist an irrevocable, perpetual, non-

exclusive, fully paid, worldwide license to use, copy, perform, display and distribute said Content. . .” (Craigslist Terms of Service, July 24, 2010)
6

“with respect to Content you submit . . . you grant us the following world-

wide, royalty-free and non-exclusive license(s) . . . the license to use, distribute, reproduce, modify, adapt, publicly perform and publicly display such Content . . . “ (Roommates.com Terms of Service as of July 24, 2010)
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54.

Instead, Ripoff Reports restricts subjects wishing to defend

themselves or others identified in a Report to placing such comments in a “rebuttal” or as a “comment” to a Rip-off Report. 55. Rebuttals and comments are placed in a less prominent position than the Reports. They are in smaller type, and lower down the screen, than the headers and main body of Rip-off Reports. 56. Ripoff Report also has designed the ROR Website with various technical restrictions that make it much more difficult to reproduce, memorialize or share the rebuttal and comment sections purportedly attached to the Reports. 57. Attempts to print a Rip-off Report directly from a standard web browser such as Firefox will only print the negative Rip-off Report and sidebar advertising, and will not print the purportedly associated rebuttals and comments. 58. The Rip-off Report section of a ROR Website web page containing a Report includes a “print this” button. However, using the “print this” button will only print the negative Rip-off Report and sidebar advertising, and will not print the purportedly associated rebuttals or comments. D. Ripoff Report’s Commercial Goods and Services 59. Ripoff Report is a business. In addition to being in the business of

attracting visitors to the ROR Website and advertising against the resulting visitor traffic analytics, selling paid advertising links and banner and sidebar advertisements, Ripoff Report directly vends goods and services in interstate commerce through the wires by means of, inter alia, the ROR Website and emails. 60. Among the goods Ripoff Report sells is a book, pamphlet or guide called the “Rip-Off Report.com Do-It-Yourself Guide: How to Get Rip-off Revenge.” This book is offered for sale in the United States for $21.95.

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61.

Purchasing this book is actually “Step Two” in following the ROR

Website’s “How to Get Rip-Off Revenge” instructions. Step One is to file a detailed Rip-Off Report at the ROR Website. 62. At all times relevant herein, and since at least 2005, Ripoff Report has offered and offers for sale, through the ROR Website and through emails in interstate commerce a program called the “Corporate Advocacy Program” (sometimes herein, “CAP”). 63. Defendants describe CAP as “where a business may publicize its proactive approach to addressing . . . complaints.” Defendants insist that “all businesses will get complaints, but how those businesses handle those complaints separates good business from bad business.” Defendants advertise to the public that that CAP “demonstrate[es] yours is an honest business, with integrity, and willing to make a commitment to righting consumer wrongs.” 64. In or around April 2010, Defendants also introduced the “Ripoff Report Verified Safe” program. Defendants advertise, with reference to CAP, “This program now includes – Ripoff Report Verified.” 65. The ROR Website depicts a logo for the Ripoff Report Verified Safe program comprising a stylized figure of a person wearing a necktie with a halo floating above, and a checkmark in a box, together with the tagline “businesses you can trust!” 66. Defendants advertise that this Verified Safe Program “also includes a commitment to Ripoff Report Corporate Advocacy Business Remediation and Customer Satisfaction Program,” which is CAP. Defendants advertise CAP as “a program that benefits the consumer, assures them of complete satisfaction and confidence when doing business with a member business.” 67. The web page on the ROR Website dedicated to the “Ripoff Report Verified Safe” program represents, in hyperlinked text, that “Advertisers have met our strict standards for business conduct. Clicking on that hyperlinked text directs the viewer to another web page located at the URL
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7

http://www.ripoffreport.com/ConsumersSayThankYou/AdvertisingStandards.aspx and titled “About Us: Advertising Standards.” 68. On the “About Us: Advertising Standards” web page of the ROR Website, Defendants state that they ensure an advertiser is “Scam-free and has no outstanding reports filed against them.” This implies that having “outstanding Reports” on the ROR Website means a business cannot be trusted. E. Ripoff Report’s Relationship with Search Engines and HTML 69. In order to truly understand the nature of the harm and destruction

wrought by Defendants, it is critical to recognize the importance of search technology in the modern use of the Internet. 70. Search is currently the most powerful, vibrant determinant in the way people use the Internet today. The global search advertising market was a reported $6.2 Billion in the second quarter of 2010.7 Google, which reported a total market capitalization of $36 Billion in 2009, rose to prominence by making the Internet searchable. 71. Courts have long recognized the importance of search as a means for users to locate information or consume content of interest on the Web. In 2000, the Court in Bihari v. Gross, 119 F. Supp. 2d 309, 312 (S.D.N.Y. 2000) wrote of search: “Because entering the company's name as the domain name often fails to take the user to the desired webpage, many users prefer the . . . search technique. Here, a websurfer enters a particular company name or search

Source: Investor Business Times, “Google search share slips, Baidu gains: report” (July 23, 2010).

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request in a search engine. The search engine then displays a list of websites that match the user's request. The search engine ranks the relevant sites according to the relative frequency with which the word or phrase appears in the metatags and in the text of the websites. The websurfer then chooses, based on any number of considerations, which website to visit.” Bihari v. Gross, 119 F. Supp. 2d 309, 312 (S.D.N.Y. 2000). 72. Many members of the public influenced by a Rip-off Report do not locate it by navigating to the ROR Website by domain name -- ripoffreport.com -and then searching the ROR Website for a company or a person. 73. Instead, many -- if not most -- discover Rip-off Reports by searching for that company or person on the Web generally, by entering the name of that company or a person as a query in a search engine such as Google and then viewing the web pages returned in response to the search query. 74. The public often does not type in unique web addresses or "URLs” into address bars in their browsers. Instead, it is much more convenient and often faster to type in a query to the search pane of a browser or enter a search query into one of the major search engines: Google.com, Yahoo.com, or Bing.com. See Declaration of Joe Reed, attached as Exhibit “25” and Declaration of Anthony Howard attached as Exhibit “24.” 75. Defendants’ conduct herein encompasses their affirmative activity directed at search engines through the HTML which they cause to be designed, written, generated and published for each unique web page comprising the ROR Website. Thus, the Ripoff Report enterprise communicates with the public by shaping the HTML and Report texts in ways that it knows will influence search results to appear in certain, predictable ways. 76. HTML is the language of expression for individual web pages that are published to the web. The ROR Website comprises an estimated over 500,000 unique web pages, by Defendants’ admission.

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77.

HTML determines not only how a web page is formatted to a viewer,

but also influences how a page is located and displayed in response to a search engine query. Among other things, a web page’s HTML influences (1) the order in which a search engine query returns and displays results for a particular web page (“page rank”) and (2) how the description of the web page returned by the search query appears (“search result”). 78. It is well-recognized that a party can be held liable for damages proximately caused by writing or causing computer software, computer code, or HTML to the extent it influences the public through a search engine. 79. Courts have long held parties accountable for their deliberate conduct expressed in HTML and aimed at the intermediate space between the front, or user-facing, side of a Website, and the “back end” of a website. 80. Courts regularly enjoin parties to refrain from infringing trademarks through inserting infringing terms in the description and keyword metatags of HTML, and find such inclusion of infringing terms in metatags to be actionable infringement, even where the HTML is not immediately visible to the viewer. See, e.g., Brookfield Communs. v. W. Coast Entm't Corp., 174 F.3d 1036, 1065 (9th Cir. Cal. 1999). 81. Courts have also recognized that computer code can qualify as “speech,” inasmuch as it is readable by humans and computer programmers “communicating ideas to one another almost inevitably communicate in code, much as musicians use notes.” Universal City Studios v. Corley, 273 F.3d 429, 448 (2d Cir. 2001). 82. Thus, Courts have long recognized the power and impression of search results on a user surfing the Web, and held parties accountable for what they write in HTML. 83. The business model of commercial search engine companies such as Google, Yahoo and Microsoft’s Bing is an advertiser-supported one.

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84.

The underlying business model of such search engine companies is

the delivery of online advertising to as many users as possible. Websites that have more visitors create greater opportunities for a search engine company to deliver online advertisements. 85. A typical search engine user begins by entering a query, or “keywords” into a field in the search engine’s website or perhaps in Web browser bar. After a user enters keywords or terms as a search query in a search engine, blocks of text are yielded, known as “search results,” comprising the link to the web page and snippets of content associated with the web page. The order of prominence in which the search results appear are known as “page rank” or "page rankings." 86. Google operates an Internet search engine, which allows Internet users to locate Web sites that match the “keywords” or search terms they enter. A search engine uses algorithms to process the keywords and produce a “search results” page that displays links to the Web sites in the search engine’s database that match the keywords. Links to the Web sites usually are displayed in order of decreasing relevance, with the most relevant Web sites listed first. Google’s free search engine processes hundred of millions of searches daily and covers billions of Web pages. See, e.g., Google Inc. v. Am. Blind & Wallpaper Factory, Inc., 74 U.S.P.Q. 2d 1385 (N.D. Cal. 2005) at *6. 87. A person searches for a business or person by typing the business or person as a query into a search engine such as Google, Yahoo, or Bing. She views the pages of results returned by her search query, in decreasing order of “relevance” as determined by the search engine’s proprietary algorithms. 88. What she sees is a powerful first impression of the subject of her search query. Both the "search results" and "page rankings" are important determinants for a user filtering the total amount of information available to the public through Internet research.

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8

89.

An entire business of "search engine optimization" or “SEO” has

developed around the critical importance of these factors. Search engine optimization concentrates on “organic” or “algorithmic” search results -- that is, natural, unpaid, search results and page rankings (as opposed to “Sponsored Results” that appear on the side of the main search results page and which are influenced by the purchase of keywords). See Howard Declaration, Exhibit 24. 90. Search engine optimization has been described as the business of “help[ing] companies rank high on Internet search engines, such as Google, for certain keywords, so that their prospective customers can find them on the web.” See, e.g., Rhino Sports, Inc. v. Sport Court, Inc., 2007 U.S. Dist. LEXIS 32970 (D. Ariz. May 3, 2007) at *7. 91. The size of the market for SEO services provided to companies seeking to attract customers to their websites through optimizing content on the Web about them for search engines such as Google, Bing or Yahoo was, in 2009, a reported $14.6 billion.8 92. Courts have long recognized the importance of this first impression in the context of “initial interest confusion” in trademark cases, whereby “the defendant, by diverting or capturing the consumer’s initial attention, improperly benefits from the goodwill that the plaintiff developed in its mark.” 93. In this case, the Defendants improperly assassinate the goodwill of the subject in search results. They do not do this solely for altruistic reasons. They do this for their own direct pecuniary gain, either (1) in the form of sales of goods and services, or (2) in the form of increased Web traffic to its ROR Website, which drives up the statistics in web analytics that partially determines the amount of advertising revenue they receive from online advertisements. It is a win-win situation for Defendants.
Source: Crain’s Cleveland Business, “Search Engine Adviser’s Growth Easy to

Fathom.” (July 23, 2010).
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94.

Thus, Defendants’ conduct herein must be viewed not only in terms of

what is displayed on the ROR Website itself, but also in terms of what Defendants cause to be published in the “HTML” for each web page on the ROR Website in view of the economics of advertiser-supported search engine business models. 95. content. 96. Defendants are the owners of all Reports, rebuttals and comments by Defendant fills the content with paid the time anyone ever reads them. By the time any content is published to the Web through the ROR Website, Defendants have already acquired an exclusive, perpetual license to the

advertisements, links and sometimes paid endorsements or testimonials. Speech on the ROR Website is thus commercial speech, and accorded a lower level of protection under the First Amendment than purely expressive speech. 97. The HTML influences such things as the URL for the web page, how prominently ROR Website web pages rank in search query results and which information about Rip-off Report subjects appears in actual search results. 98. Defendants have taken many affirmative, deliberate actions in designing and controlling the process by which HTML is generated for the over 500,000 unique web pages comprising the ROR Website that are deliberately intended to improve the organic search results for web pages containing Rip-off Reports when the subject’s name is search queried. 99. In particular, Defendants have been successful in maintaining favorable page ranking, or “authority” from Google for the over 500,000 web pages comprising the ROR Website. F. Ripoff Report’s Authority with Google and Preference for Google 100. The ROR Website has been on the Internet since 1998.

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101. Google is by far the most popular search engine for Web searches. In July 2010, an estimated 69.7% of users use Google as a search engine, an estimated 5.4% use Yahoo, and an estimated 4.8% use Microsoft’s Bing. 102. Some professional SEO consultants have openly speculated that search engines Yahoo and Bing have changed their search algorithms to “punish” or downgrade Ripoff Report within their organic search results, based on the observation that search queries conducted through Yahoo or Bing for a company or individual will ordinarily return search results that rank web pages from the ROR Website containing or referring to that company or individual relatively low. 103. However, Google’s search algorithms continue to give high “authority” to web pages from the ROR Website. Having high “authority” means a website’s individual web pages rank consistently highly in search query page rankings. 104. Search queries conducted through Google for a company or individual will ordinarily consistently return search results that rank web pages from the ROR Website containing Rip-off Reports about that company or individual (the “subject”) relatively highly, if any such Rip-off Reports exist. 105. For a small business or individual that has not deliberately engaged in any SEO activities, if there is a Rip-off Report about that subject, a Google search for that business or individual will frequently return search results that rank the web page containing the Rip-off Report about that subject on the top page of Google search results, if not as the first page rank. G. Defendants’ Use of Domain Names To Influence Google Page Rankings 106. One of the factors that influence a particular web page’s ranking in responses to Google search engine queries is the domain name and URL assigned to it.

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107. Defendants are responsible for the operating system, website design, and user interface of the ROR Website. As designed, maintained and operated by Defendants, the user interface of the ROR Website generates a unique URL for each web page associated with each of the over 500,000 Rip-off Reports hosted through the ROR Website. 108. A ROR Website user cannot actually choose a URL to assign to the web page associated with a Rip-off Report. Defendants own and control all domains and sub-directories that direct through the ROR Website located at ripoffreport.com. Only Defendants can create a web page with a URL that begins with the domain name “http://www.ripoffreport.com/ . . . “ 109. Ripoff Report designs and operates its user interface and website operating system in a manner that it creates a unique URL for every ROR Website web page that includes in the URL itself, the name of the subject of the Report, sometimes repetitively. 110. This inclusion of the subject’s personal or business name in the unique URL for a Report, always combined with the “ripoffreport.com” domain names for Rip-off Report web pages influences Google’s search engine to give higher page rankings to Reports than web pages located at URLs that do not include such business or personal names in the URL. 111. For example, in Rip-off Report number 621543, a Report about a company called “JobsforMoms.com” with the headline “JobsforMoms.com take our money and run Internet” generates the domain name http://www.ripoffreport.com/work-at-home/jobsformoms-com/jobsformoms-comtake-our-mone-8e566.htm. This URL visibly incorporates the words “ripoff,” "ripoffreport," "work," "work at home," "home," "jobsformoms", and "jobsformoms.com" and would result in a higher page ranking for the web page hosting Report 621543 in search queries for those words than a web page located at a URL that did not include those words in the URL itself.

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112. The Ripoff Report enterprise designs and operate their website operating system, directories and subdirectories to generate unique URLs for individual ROR Website web pages that include the names of companies or individuals written about in the Reports. These URLs are created, controlled by and owned by Defendants thus influence search engines to return higher page rankings for ROR Website web pages displaying Rip-Off Reports about the subject companies or individuals than other web pages that may mention the same company or individual but do not include the company or individual’s name in the domain name. 113. Another place the Ripoff Report enterprise optimizes the Reports for search engines are in the headlines. The “headlines” for many Rip-off Reports are not written in standard English with ordinary grammar and syntax. In many instances, they read like nonsense or gibberish. Such “headlines” frequently include redundant, repetitive instances of a company or individual’s name.

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114. For example, Defendants published to the Web on or about January 28, 2009 Rip-off Report number 417493 concerning Plaintiffs. A true and correct reproduction of relevant portions of Report number 417493 and screen shot showing the URL in the browser bar is reproduced below. 115. At all times relevant herein, Report number 417493 included text near the top that repeats the name of Plaintiff Asia Economic Institute twice and also includes the acronym “AEI.” “Asia Economic Institute, AEI, WorldEcon: Raymond Mobrez And Iliana Llaneras Complete exploitation as an employee. Do not work for the Asia Economic Institute its a SCAM! West Los Angeles California.” 116. The URL for the web page on the ROR Website that displays Report number 417493 is currently http://www.ripoffreport.com/employers/asiaeconomic-instit/asia-economic-institute-aei-ef3f4.htm. This mirrors the double

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inclusion of Plaintiff Asia Economic Institute’s name and the inclusion of the acronym “AEI” that is also in the header.

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117. The Ripoff Report enterprise changed the URL for Report 417493 at some time between the date it was originally published and the present. In or about January 2009, the URL for Report 417493 did not include so many repetitive instances of Plaintiffs’ names. The Ripoff Report enterprise has since “optimized” it for search engines. 118. Defendants updated Report number 417493 on or about May 21, 2010 at 3:30 p.m. Pacific Standard Time. Defendants continuously publish Report number 417493 to the Web. 119. At some time between January 28, 2009 and the present, Defendants caused the terms “Asia Economic Institute” to be repeated in the header of Report number 417493 and in URL for the web page displaying Report number 417493 to attract search engines to the web page of the Report for search queries for “Asia Economic Institute” and to influence the search engines to rank the web page more highly, rather than to express an idea to a reader that has already navigated to the page displaying Report number 417493. 120. Many businesses and individuals of ordinary sophistication have not purchased domain names consisting of their business or personal names. Many, if not most, businesses and individuals or ordinary sophistication do not host content at URLs or domain names that include their business or personal names. G. Defendants’ Preferential Treatment of Google and Founders in Reports 121. Ripoff Report actively and deliberately encourages users to prefer Google as a search engine above others, invoking Google frequently by name. Various portions of the ROR Website and form emails sent by Defendants on May 12, 2009 to Plaintiff Raymond Mobrez state, “Why do we win? – just do a Google search for Communications Decency Act” or suggests recipients of emails to “Google” for advertisers to demonstrate the validity of various propositions.

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122. Ripoff Report also strongly protests on the ROR Website that it does nothing to earn special, favorable treatment from Google. 123. As early as June 26, 2009, Defendants stated on their website: “Why would a multi-billion dollar company like Google give preferential treatment to a relatively small, controversial site like Ripoff Report? IT WOULDN'T, PEOPLE! . . . Ripoff Report has never, ever (not now, and not in the past) done anything to cause Google to rank our website higher in search results than other sites.” Plaintiffs viewed such statements on June 26, 2009 and October 27, 2009. 124. Despite this protest, Defendants changed significantly the content of Report numbers 607436, 517026 and 144627 in a manner that makes the Reports more favorable to Google and its founders, Sergey Brin and Larry Evans. 125. Report number 607436 is a complaint about the Google Adwords program. The purportedly user-submitted Report by “Chris” of Atascadero, California, bears the headline beginning “Google Adwords Waste of Time Internet” and states that the user’s ad performed much better on Yahoo. 126. On or about May 31, 2010 at 9:31 a.m. Pacific Standard Time Defendants inserted in type of equal prominence on Report 607436, and transmitted through the wires in interstate commerce through the ROR Website the following false statement: “NOTICE..!! this ripoff has nothing to do with Google search engine – many rip-off businesses use the Google name to fool consumers.” 127. The “Notice” on Report number 607436 transmitted by Defendants is false on its face. The true facts are that AdWords is a program operated and owned by Google, the same company as Google search engine. Google Adwords is sold at http://google.com/ads/adwords2 and the Google search engine is located at http://google.com. Both reside under the same top-level domain name, google.com 128. A true and correct copy of relevant sections of Rip-off Report Number 607436 is reproduced herein.

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129. Defendants also placed a false “*Notice” in between the title and header of Rip-off Report Number 517026. A true and correct copy of relevant portions of Rip-off Report Number 517026 is reproduced below:

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130. Report number 51706 is a complaint about the Google Adwords program. The Report is dated Thursday, October 29, 2009 and indicates the last posting was October 30, 2009. The purportedly user-submitted Report number 517026 by “Robert” of Painesville, bears a headline including “google Adwords advertising ripped me off on sponsored search advertising Internet” and states that “anyone thinking of trying Google adwords sponsored search advertising don’t Do It.” 131. On or about October 30, 2009, at 4:26 p.m. Pacific Standard Time, Defendants inserted in Report number 517026 and transmitted through the wires in interstate commerce through the ROR Website, the following false statement, in bold type of much larger point size than the body of the Report consisting of the following “Notice”:
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“NOTICE..!! this ripoff has nothing to do with Google search engine – many rip-off businesses use the Google name to fool consumers.” 132. The “Notice” added by Defendants on Report number 517206 is false on its face. 133. The true facts are that Google does offer a keyword-triggered advertising program called “AdWords.” See Google Inc. v. Am. Blind & Wallpaper Factory, Inc., 2005 U.S. Dist. LEXIS 6228 (D. Cal. 2005) at *6. 134. Plaintiffs are informed and believe and thereon allege that Defendants changed the names in Report number 144627 from “Sergey Brin” to “Soney Bonoi.” 135. Defendant Magedson admitted that he suppressed or changed the names in Rip-off Reports about Google Co-founder Sergey Brin because Google is a company that Ripoff Report does business with and Magedson “was personally told that [a user was] going to file phony reports about Google, anybody that [the user] could find out that I was doing business with.” 136. Defendant Magedson admits that Sergey Brin is not a member of the Corporate Advocacy Program. Therefore, Defendants added the additional material in Report number 607436 and changed the names in Reports. 137. The true facts are that Ripoff Report does many things in creating, formatting and publishing the web pages and associated HTML of content it publishes to the Web that optimize its ranking with search engines, particularly Google, and that influence the way search results appear. H. Defendants Alter Google Search Results for CAP Members 138. Defendants misrepresent their SEO efforts in part to appear authentic

to the public and add credibility to the Reports. The Ripoff Report enterprise then offers certain ways that a subject can change or contribute to his or her own Report. One is by joining CAP.
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139. There are at least two ways to become a member of Defendants’ Corporate Advocacy Program. The first, “official” way is to engage in Defendants’ elaborate CAP application process. 140. Following the “official” method of enrolling for CAP, the potential applicant jumps through various procedural hoops, makes various written factual admissions, agrees to jurisdiction in Maricopa County, Arizona and eventually compromises and waives substantive legal rights, including all claims against Defendants. 141. The first step is to complete an intake questionnaire included on the ROR Website, a sample of which is attached hereto as Exhibit “2” as it appeared on July 26, 2010, and which is in substantially the same or same form as presented by the Ripoff Report Enterprise to Plaintiffs at all relevant times herein (“First Questionnaire”). 142. The First Questionnaire informs applicants that the program “requires accepting responsibility for past problems and a commitment to making things better.” It asks applicants, “Will you be willing to accept responsibility for mistakes made?” 143. On information and belief, Plaintiffs allege that a CAP applicant must answer this question in the affirmative, as well as describe information such as the average dollar amount of its sale, to continue in the application process. Attached hereto as Exhibit “3” are true and correct copies of electronic mails between one such prospective CAP applicant, Tina Norris (“Norris”) and Magedson, including those sent on March 9, 2010 at 8:23 p.m., May 20, 2010 at 7:55 a.m., and May 20, 2010 at 10:31 a.m. On March 2, 2010, Norris filled in and submitted the information requested by the Ripoff Report enterprise as responses to the First Questionnaire through the ROR Website. 144. After receiving responses to the First Questionnaire, Defendants send interested CAP applicants an email that advises applicants, inter alia, that they have the option of filing a free rebuttal to any Rip-off Reports about them on the
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ROR Website. Prospective CAP members receive an email from Defendants that instructs them to copy and paste into a return email to Defendants the following text: “Dear Rip-off Report, I understand I could file rebuttals to the one or small hand full of reports I have. I would still like to understand the program that Rip-off Report has created to try and help businesses gain consumer trust, whether or not the reports are true or false. I realize, with or without Rip-off Report we would get complaints somewhere. I have already filled out the form which is below for your review. Please send me the RATES and whatever information you think I need to know about the benefits of joining Rip-off Report Corporate Advocacy Program.” On March 9, 2010 at 8:23 p.m., Magedson sent Norris an email with the abovedescribed instructions and requesting the above-described acknowledgement (Exhibit “3”). 145. On May 20, 2010 at 7:55 a.m., Norris cut and pasted the requested text into an email and emailed that reply back to Magedson, as requested in Magdson’s March 9, 2010 email to Norris (Exhibit 3). 146. Thereafter, Defendants send prospective CAP applicants an email with the subject “Corporate Advocacy Intake Form” with several attachments. The attachments include (1) a document entitled “Corporate Advocacy Program Description and Rates,” which contains more details about CAP, some additional terms and conditions of CAP, some of the benefits of CAP, and a rate sheet setting forth the fees for CAP (“CAP Rate Sheet”), (2) a document entitled “Sample letter we send to anyone that filed “a Ripoff Report.” 147. A true and correct copy of an actual “Corporate Advocacy Program Description and Rates” and covering email that was sent from Defendant Magedson to Tina Norris (“Norris”) on May 20, 2010 at 10:31 a.m. Central Standard Time with the subject line “Corporate Advocacy Intake = TNT MGMT,

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Tina Norris – 11 Reports? Our philosophy – the RATES” is attached hereto as Exhibit “3” at pages 6 to 10 and incorporated herein by this reference. 148. A true and correct copy of the attachment to the May 20, 2010 10:31 a.m. email from Magedson to Norris consisting of solely the “Corporate Advocacy Program Description and Rates” document is attached hereto as Exhibit “4.” The first page of that document written and sent by the Ripoff Report enterprise states: “NOTICE: Jurisdiction for this program is in Arizona, under the laws and the state of Arizona. Doing this program, both parties agree they will have no claims against each other, and jurisdiction for any disputes is in Arizona, Maricopa County.” Exhibit “4.” 149. The cost of joining CAP is revealed in the Rate Sheet, entitled “Costs for the Cap Program - $$$$.” A true and correct copy of the Rate Sheet portion of the Corporate Advocacy Program Description and Rates emailed to Tina Norris by Defendant Magedson on May 20, 2010 at 10:31 a.m. Central Standard Time is attached hereto as Exhibit “5.” 150. The cost of joining the CAP program has two components, (1) an initial charge, consisting of a “Programming” charge plus a flat fee based on the number of reports existing at the time of joining the program, and (2) a mandatory, 36-month contract requiring “Monthly Monitoring Fee” payments of between by the third of the month. 151. To join CAP, an applicant with 1 to 350 Reports must pay the initial Programming charge is $7,500, plus a flat fee of between $600 to $140,000, plus a 36-month contract to pay between $35 to $7,000 per month, depending on the total number of Reports at the time of joining. 152. To join CAP, an applicants with 351 to 500 Reports must pay the initial Programming charge is $8,500, plus a flat fee of between $122,850 to $175,000, plus a 36-month contract to pay between $5,265 to $7,500 per month, depending on the total number of Reports at the time of joining.
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153. To join CAP, an applicant with 501 to 1000 Reports must pay the initial Programming charge is $15,500, plus a flat fee of between $122,850 to $175,000, plus a 36-month contract to pay between $7,515 to $15,000 per month, depending on the total number of Reports at the time of joining.. 154. To join CAP, an applicant with 1001 to 1500 Reports must pay the initial Programming charge is $20,500 plus a flat fee of between $250,250 to $375,000, plus a 36-month contract to pay between $10,010 to $15,000 per month, depending on the total number of Reports at the time of joining. 155. If the applicant is more than 10 days late in paying a monthly monitoring fee, a $50.00 late fee per day is assessed, which is incorporated into the member’s currently, monthly fee. 156. Thereafter, another step that an applicant to CAP must take is to provide more detailed information about its business to Defendants in the form of a second questionnaire (“Second Questionnaire”). A true and correct copy of an example of Defendants’ Second Questionnaire is attached hereto as Exhibit “6.” 157. The Second Questionnaire purports to be “Questions for the Agreement” that Defendants will prepare based on the CAP applicant’s answers. 158. The email accompanying the Second Questionnaire explains that a few days after successful completion of the Second Questionnaire, Defendants will send an agreement for the CAP member’s signature (“CAP Agreement”). 159. Defendants represent that upon return of a signed CAP Agreement with payment, Defendants will send the CAP member, inter alia, a “TEXT outline so you can give us your proposed comments you would like us to use to talk about your company, explaining changes your company has made . . . and other positive comments about your company.” 160. Defendants also promise that upon joining the CAP program (by returning the signed CAP agreement with payment, Defendants will, inter alia, send the CAP member “the 250 to 350 words you want us to put in front of the Reports found on search engines.” Finally, The Ripoff Report enterprise gives as
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an example, a Google search query “like this one…http://www.google.com/search?hl=en&q=Blue+Coast+Financial&aq=f&aqi =g8g-m1&aql=&gs_rfai=” 161. This Google search query for “Blue Coast Financial” yielded, as of July 25, 2010, search results as reproduced in the screenshot below: 162. As promised, joining CAP has turned the “negative” into a positive in

Google search results. The web page for Rip-off Report number 412338 still remains in a high-ranking position three in page rank for a Google search query for “Blue Coast Financial.” However, the viewer of the Google search query results sees only the following preview snippets of text for the web page displaying Ripoff Report Number 412338:

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“Blue Coast Financial Review | Rip-off Report #412338 Apr 9, 2010 ... INVESTIGATION: Shawn Hull, Blue Coast Financial Commitment to 100% client satisfaction, Feel confident and secure when doing business with ... www.ripoffreport.com/.../Blue-Coast-Financial/investigation-shawn-hullblu-cc86w.htm - Cached - Similar” 163. The reason this happens is that after a subject joins the CAP program,

the negative content in the Rip-off Report about the subject may not be removed, but the negative comments are pushed so far down the “content” attribute of the “head” section of the HTML code for the web page displaying the Report that the negative content becomes virtually irrelevant to the search engines because of the overwhelming “good” content placed in the first 90% of the metatag. 164. Cash4Gold: <meta name="keywords" content="rip-off, ripoff, rip off, Cash4Gold, Corrupt Companies" /><meta name="description" content="INVESTIGATION: Cash4Gold customers can feel safe confident & secure when doing business Cash4Gold & Albar Precious Metal Refining – Commitment to total customer satisfaction, positive rating for its customer support. Consumers best bet when looking to get Cash for Gold.*UPDATE ...Rip-off Report Investigation: Cash4Gold pledges to resolve complaints. Commitment to Rip-off Report Corporate Advocacy Program.- Executives stated "We are only as strong as our weakest link running a company of this size & volume you must adapt to your customers needs" Over $350,000 spent on new state of the art tracking systems " /></head> 165. In the above example, the new, custom “content” is shown after the “content=” attribute inside the second set of meta “angle brackets” (between the
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An example is shown below, for Ripoff Report’s advertiser,

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“<meta” and the “/>”. Although the previous negative part of the actual Report may not be physically removed, it is effectively removed for search results because of the change in meta tags and overwhelming page modification with positive comments. 166. The actual Rip-off Report used as an example in the Second Questionnaire Email, Report number 412338, appears to have been replaced by a retraction from the original poster as of July 25, 2010. A true and correct copy of Report Number 412338 as it appeared on July 25, 2010 currently is attached hereto as Exhibit “7.” 167. Report Number 412338 provides in part: “Dear Editor: Please publish the following post: I would like to retract my original post. I was completely wrong for posting what I did about Blue Coast Financial. After my post rip off report investigated the company and that made me think about what I was actually doing. I would like to apologize to the company and staff that tried to help me make this business successful.” Exhibit 7. The “original post” referred to in Report 412338 is not visible. 168. Thus, the Ripoff Report enterprise promises, perhaps tacitly, that membership in CAP will get the CAP member favorable, prominent search results, and points the CAP applicant to an example where the original Report has obviously been replaced. The only thing that appears to remain the same is the number. 169. A second, “unofficial” way to get into CAP is to file a lawsuit against Defendants. 170. The Ripoff Report enterprise makes many representations of fact to the public and to victims in furtherance of the Content Trolling Scheme. 171. Among Defendants’ most striking false representations, both on the ROR Website on both June 26, 2009 and October 27, 2009, and in emails to
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individuals seeking information about Rip-off Reports, is that “WE DO NOT Remove any Rip-off Reports” and never removes reports for money. 172. ROR falsely claims that it never takes down reports, whether for money or even if you sue, including currently on the Ripoff Report Website “Ripoff Report . . . will not remove complaints even if you sue.” This quotation appeared on the Website on June 26, 2009 and October 27, 2009. Plaintiffs viewed the page containing this statement on those dates, and relied thereon. 173. This is absolutely false. Ripoff Report has taken down at least two reports after litigation, and for a sum of over $100,000, in October 2009 and December 2009. 174. The true facts are that Ripoff Report has removed Rip-off Reports, and for substantial amounts of money. For substantial amounts of money, Rip-off Report will disclaim Rip-off Reports, has permitted the subjects of Rip-off Reports to write large portions of the contents, and has taken down Rip-off Reports. 175. A settlement agreement dated May 15, 2009 entered into and signed by Defendants Xcentric and Magedson, on the one hand, and QED Media Group, LLC, and Robert Russo, the subject of certain Rip-off Reports, on the other hand (the “QED Agreement”) attached hereto as Exhibit “8”, provides in part: a. b. d. “QED will pay to Xcentric the sum of Eleven Thousand dollars ($11,000) in the form of a cashier’s check; . . . QED will execute a promissory note [to Xcentric] for the principal sum of Ninety Thousand Dollars ($90,000) . . . Xcentric will insert into the beginning of the body of Report number 311070, Report number 254798, and Report number 261756 up to 250 words of content provided by QED.”

Exhibit 8. 176. Defendants induce subjects of negative reports, including Plaintiffs, to take steps that effectively aggravate their injuries rather than helping them, by posting rebuttals, while deterring them from exercising their rights by misleading them as to Defendants’ track record of success in the courts.
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177. ROR tells the subjects of its reports that they can tell their side of the story if they file a “rebuttal.” 178. However, not all rebuttals are posted. Moreover, what ROR does not tell subjects of reports is that filing a rebuttal is likely to increase the prominence of the negative statements, and does so in a way that only the negative appears in search results, not the positive. See Exhibit 24. 179. ROR also does not tell subjects that filing a rebuttal is financially helpful to ROR because it increase the visitor traffic, amount of fresh content and strengthens the overall authority of the site. 180. ROR also does not tell those to whom it advocates filing a rebuttal that ROR then sells advertising links from the rebuttals. Thus, ROR is the ultimate “troll” – a website that baits innocent people into defending themselves, and then advertising against the fresh content contained in their rebuttals. 181. Furthermore, ROR claims that you can always file a free rebuttal. This is false. Many rebuttals do not get posted, thus depriving subjects of the ability to tell their side of the story and aggravating the harm to their reputation on the Internet with devastating consequence to their business and personal lives. Moreover, the claim that anyone can file a free rebuttal leads the public to infer that the subject does not have a response. 182. ROR also makes a number of exaggerated claims concerning its own legal liability. It claims never to have lost a case, and that people who sue will pay their legal fees. This intimidates subjects and potential lawyers from exercising their rights through overly exaggerated misrepresentations of the proper standards of law, amount to fraud under the circumstances. Meanwhile, their victims’ businesses quickly disintegrate, leaving them desperate, and if they followed ROR’s advice to post rebuttals, ultimately without true recourse except to join CAP or pay an SEO consultant. 183. Ripoff Report presents CAP and its Verified Safe program as endorsements that a consumer can trust. This violates Section 5 of the FTC ACT,
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15 U.S.C. § 45, and the Codes of Federal Regulations promulgated there under, 16 C.F.R. Part 255.0 et seq. because Defendants fail to make material disclosures that would affect consumer’s perception of Defendant’s endorsement of such programs as paid advertisements and are not neutral and objective. 184. Defendants’ conduct violates the FTC Guides because ROR does not disclose that it is paid money to make these testimonials and endorsements. They will endorse and verify safe anyone that pays them, even when the federal authorities have found the endorsed business to be corrupt. 185. Finally, ROR claims that it has not done anything to get more favorable search results with Google. Yet, ROR has altered content concerning Google to maintain its good favor. 186. Together, these false statements and misrepresentations constitute a scheme to defraud Plaintiffs and others similarly situated through the use of wire communication as defined in 18 U.S.C. § 1343. 187. This pattern of wire fraud proximately caused the injuries to Plaintiffs and others in their business or property as defined in 18 U.S.C. § 1962(c) and (d). 188. Desperate, the subjects of Reports are overwhelmed in the aftermath of having a report go up about them. 189. The distress of a subject is well known among a business sector of consultants who purport to have knowledge as to how to address the existence of a Report. 190. Victims are deluged with calls, e-mails and faxes from services soliciting fees to “repair” online reputation caused by the ROR. 191. Defendants intentionally used their Web site as a scheme to attempt to obtain money from advertisers, Plaintiff and others by means of (1) the negative Google search results generated from Rip-Off Reports and (2) false and defamatory content acquired and distributed by Defendants. 192. Promising media attention and monetary compensation via class action lawsuits, Defendants solicit purely negative content about businesses and
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individuals and guide the creation of these complaints with their “Ripoff Revenge” guidebook. In fact, the “Rip-off Report Do-It-Yourself Guide to Rip-off Revenge” offers “step by step instructions” to readers looking to redress their grievances. 193. Defendants then label these businesses or individuals a “Ripoff” and preclude publication of positive Reports. 194. This biased presentation of these targets appears in Google search results and are typically visible on the first page of the results page. 195. Using the pseudonym “Corporate Advocacy Program” (“CAP”), Defendants charge as much as $7,500 to replace the negative search results with positive affirmations. In addition, CAP members must pay a fee based on the number of reports and a monthly monitoring fee per report times the reports originally filed. The monthly monitoring fee agreement is for a minimum term of 36 months. V. DEFENDANTS’ VIOLATIONS OF 18 U.S.C. § 1343 (Wire Fraud)

17 18 19 20 21 22 23 24 25 26 27 28

A.

Defendants Falsely Represent That “Reports Never Come Down” 196. Defendants make several, false and fraudulent statements of fact on its

Web site and in e-mails sent by Defendant Edward Magedson to Plaintiffs and others similarly situated in a concerted effort to collect revenue from the sale of their “Ripoff Revenge” guidebook, sale of their Corporate Advocacy Program, advertisements, Internet traffic and link referrals. 197. These misrepresentations were made with the specific intent of: (1) deceiving the public as to the legitimacy of their purported “consumer advocacy” site; (2) deceiving the public as to the impartiality of their Rip-off Reports; (3) deceiving the public as to safety of those businesses and individuals endorsed via CAP; (4) deceiving the targets of the Ripoff Report enterprise into believing the
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free rebuttal will be effective and helpful; and (5) deceiving the targets into believing that legal action is futile because it cannot accomplish the goal of removing Reports from Defendants’ database or the ROR Website, and that the only way to remedy the harmful effects of Defendants’ Web site is through payment to information technology consultants or the Defendants themselves. 198. Defendants mislead those victimized on their website when they state both on the site and in emails they “never take reports down.” come down” or “reports always stay up.” 199. At all times relevant hereto, Defendants state on the ROR Website that they “never remove reports.” 200. Defendants state on the ROR Website, including on April 3, 2009 and on July 26, 2010 that: “Since the Ripoff Report was started in 1998, our policy has always remained the same – we never remove reports.” 201. Currently, and at all relevant times hereto including specifically on They have expressed this false statement in a number of ways, also stating that “reports never

18

April 3, 2009, June 26, 2009 and July 26, 2010, the Ripoff Report enterprise makes
19

the following statements of fact through the ROR website:
20

i.
21 22

“We . . . will not consider removal requests from anyone, including a “Ripoff Report . . . will not remove complaints even if you sue.” “We don’t write reports, and we don’t remove reports. PERIOD.”

request which claims to be from the original author of a report.” ii.
23

iii.
24 25

202. A true and correct screen shot of the ROR Website containing these statements of fact as it appeared on July 23, 2010 is attached hereto as Exhibit
26

“9.”
27

203. On May 12, 2009, Defendant Edward Magedson sent Plaintiff
28

Raymond Mobrez an e-mail containing the following false statements of fact: i. “Rip-off Report is a permanent record.”
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ii. iii. iv. v. vi.

“a Rip-off Report cannot be taken off.” “we have a uniform policy against removing reports.” “WE DO NOT Remove any Rip-off Reports” “we do not remove a submitted Rip-off Report, and we never will.” “Some people claim we remove reports for money, but that is just plain false.”

Attached hereto as Exhibit “10” is a true and accurate copy of the email sent on May 5, 2009 from Magedson to Mobrez making these false statements of fact. 204. On July 24, 2009, Defendant Edward Magedson sent Plaintiff Raymond Mobrez an e-mail containing the following false statement of fact: “We do not remove reports.” 205. The true facts are that Reports do, in fact, come down, for substantial sums of money, and after a lawsuit, and that Defendants do write portions of Reports in collaboration with CAP members or parties with whom they have settled a lawsuit. Attached previously hereto as Exhibit “8” is a true and accurate copy of a non-confidential settlement agreement between Xcentric Ventures, LLC, Ed Magedson and QED Media Group, LLC and Robert Russo whereby the parties agree that Defendants will not post any new reports regarding QED Media Group, LLC and Robert Russo, if the contributor of the report “can not prove to the reasonable satisfaction of Xcentric that he or she was an actual customer of QED,” if not, “ the report will not be posted.” Defendants’ Counsel has admitted that Reports have, on occasion, been removed from the ROR Web site, including pursuant to the QED Agreement, and that Russo owed significant sums of money to the Ripoff Report enterprise under the agreement providing for such removal. 206. On January 15, 2010 at 2:02 (EST), Defense Counsel for ROR, David Gingras, sent an email to Jan Smith stating that ROR was asked to take down a

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report and said “YES.” Gingras’ January 15, 2010 email to Smith is attached hereto as Exhibit “11.” 207. Likewise, Gingras stated that he may be able to remove Ms. Smith’s Reports per Edward Magedson’s approval. 208. On information and belief, reports previously categorized under “Suspicious Activities” no longer appear on Defendants’ Web site. On January 17, 2010, a Report about Jan Smith was published and appeared on the ROR Website under the category “Suspicious Activities.” By April 3, 2009, the entire category of Reports under “Suspicious Activities” was deleted. 209. In a telephone conversation that took place on April 12, 2010, counsel for Defendants, David Gingras, falsely told or implied to Jan Smith that he had “removed a report” for a 16 year old girl. 210. In an e-mail to Texas attorney, Kenton Hutcherson, dated October 29, 2009, Defendants’ counsel, Maria Speth, stated “After further reflection, and based on issues beyond compliance with the settlement agreement, Ripoff Report has decided to completely remove report number 510675. It was deactivated yesterday.” See Declaration of Kenton Hutcherson attached hereto as Exhibit “12” (including Speth’s October 29, 2009 email to Hutcherson). 211. On July 20, 2010, during a conference between both parties, counsel for Defendants, Maria Speth, confirmed that two reports concerning Mr. Hutcherson’s former client, QED Media Group, LLC, were removed on two separate occasions. See Declaration of Daniel F. Blackert, attached hereto as Exhibit “18.” 212. The false statements lead those victimized to believe they have very limited courses of action. If they wish to mitigate the damage caused by these reports, they must either pay Defendants to be in the CAP or pay an information technology (“IT”) consultant to publish alternative online content to repair their reputation via search engines.

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213. Plaintiffs did take such steps. On October 24, 2009, Plaintiffs posted a listing on Craigslist seeking an on site web product developer with SEO skills in order to combat the defamatory reports. advertisement. 214. On March 6, 2009, Plaintiffs paid a Search Engine Optimization consultant eight hundred and ninety ($890.00) dollars in connection with work performed to mitigate the defamatory reports on ROR. 215. Again on March 27, 2009, Plaintiffs paid a Search Engine Optimization consultant six hundred dollars ($600.00) in connection with work performed to mitigate the defamatory reports on ROR. 216. On May 14, 2009, Plaintiffs paid a Search Engine Optimization consultant eight hundred dollars ($800.00) in connection with work performed to mitigate the defamatory reports on ROR. 217. Thereafter, Plaintiffs paid a Search Engine Optimization consultant one hundred dollars ($100.00) in connection with work performed to mitigate the defamatory reports on the ROR Website. 218. Others have expended monies in order to mitigate and/or take down the defamatory posts on the ROR. 219. In or around February 2010, Tina Norris, another victim of the Content Trolling Scheme, paid $600 to Reputation Defender, and SEO consultant, to repair the damage caused in Google search results by the Reports published by the Ripoff Report enterprise in furtherance of the Content Trolling Scheme. 220. Another victim, Kathy Spano and her teenage daughter, residents of the State of California, engaged an SEO consultant on May 18, 2010 for the amount of $3,000 to repair the damage to the teenage daughter caused by the posting of negative Reports in furtherance of the Content Trolling Scheme. 221. Another victim, attorney Laura Snoke, a resident of the State of California, paid $3,500 upfront and $300 a month to maintain her own website and blogs specifically to counteract the presence of the negative Reports in Google
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Plaintiffs paid $25.00 to post this

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searches. Nonetheless, clients and prospective clients mention to her the Reports. A true and correct copy of the Declaration of Laura Snoke is attached hereto as Exhibit “26.” 222. The Ripoff Report Enterprise also makes these false representations that reports are never removed even if you sue, to intimidate the victims, deflect litigation to the contributors, and reinforce the myth that Defendants are immune, thus causing victims to sit on their rights while the statute of limitations runs, and in some cases, as in Blockowicz, in fact claiming that the statute of limitations for the underlying claim has run. The false statements are intended to, and in many cases do, cause victims to believe they can only exercise legal process directed at the contributors of the Reports to get ultimate relief. Defendants do not disclose that they will disobey any injunction thus obtained. 223. On April 22, 2010, Ms. Spano’s teenage daughter currently has a lawsuit pending in Superior Court for the State of California, Riverside County, against Defendant Xcentric doing business as RipoffReport.com, Lombardo v. RipoffReport.com, (RIC 10005777) for damages due to defamation and to prevent new Reports from being published. A true and correct copy of the Riverside lawsuit is attached hereto as Exhibit “20”. 224. Likewise, Tina Norris incurred one hundred and thirty-four thousand dollars $134,000 in attorneys fees’ in obtaining the identity of authors of Reports and in obtaining injunctive relief against the contributor. Nonetheless, The Ripoff Report enterprise continues to acquire and publish new content from the contributor. 225. Another victim of false reports, attorney Peter Mallon, a resident of the State of California, described that he was quoted a price of $2,995 from Quick Rep Repair to commence work on repairing his online reputation. A true and correct copy of the Declaration of Peter Mallon is attached hereto as Exhibit “21. 226. Mallon was advised by the representative of Quick Rep Repair that Defendant Magedson is generally in hiding to avoid service of lawsuits against
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him.” See Exhibit 21 at ¶8. In addition to selling services, such consultants prey upon the confusion, distress and panic induced in subjects of the Reports to compound rumors and speculation about the degree to which the Ripoff Report enterprise will respond to formal legal process or informal requests for help. Myths and rumors regarding the efficacy and availability of court remedies are aggravated and compounded by the legal advocacy published on the ROR Website to its unsophisticated victims. Plaintiffs are informed and believe and thereon allege that counsel for Defendants Xcentric and Magedson, Mari Crimi Speth, of Jaburg & Wilk, will accept service of process for Defendants Xcentric and Magedson. B. Defendants Falsely State That Victims Can File A Free Rebuttal and That Rebuttals Are Effective and Helpful. 227. Defendants also grossly overstate the ability of those targeted to file a

free rebuttal in response to negative Reports and grossly misrepresent the effect of rebuttals as being helpful, rather than harmful. 228. Currently, Defendants made and make the following false statements of fact on their Web site, at all time relevant hereto including specifically on March 4, 2009, on April 3, 2009, June 26, 2009, October 27, 2009: i. report.” ii. i. ii. iii. “you can write a rebuttal explaining your position.” “Rebuttals are 100% free, and we strongly encourage you to use “If you think a report is fake and/or written by a competitor, “Your rebuttal can also demand that the customer post some “We offer you the opportunity to file a REBUTTAL to any

this resource since they can be extremely effective.” feel free to say so in your rebuttal.” form of proof to back up their story.”

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iv. v. vi.

“Even if a customer won’t submit an update, you can write a “If you find a complaint has been filed against you, the best “If a company has received one or more Ripoff Reports, that

rebuttal stating what you have done to make thing to make things right.” thing you can do is to post a rebuttal.” business always has the option of posting free rebuttals…” Attached hereto as Exhibit “13” is a true and accurate printout from ROR’s website evidencing the above as of July 26, 2010. 229. On May 5, 2009 at 11:48 a.m., Defendant Edward Magedson sent Plaintiff Raymond Mobrez an e-mail containing the false statements: i. ii. “Just file a rebuttal . . . the truth shall set you free.” “You can simply file a rebuttal and explain your side of the

story… it’s free… and you don’t have to even read any further, just log on and file a rebuttal telling your side of the story, best to not be combative or insulting.” iii. story…it’s free.” iv. v. “Again, you can file a rebuttal(s) for free.” “we supply a REBUTTAL feature so that the company reported “You can simply file a rebuttal and explain your side of the

has a chance to respond by agreeing, disagreeing, or apologizing and explaining what will be done to fix the issue.” (See Exhibit 13) 230. The true facts are that the Ripoff Report enterprise makes it easy to file negative Reports, but make it much more difficult to file rebuttals. 231. A number of people have unsuccessfully attempted to post rebuttals in response to negative Reports about them, including, but not limited to Tina Norris and Jan Smith. 232. Between July and November 2008, Tina Norris and a team of employees attempted to file positive rebuttals to reports about her and her business, TNT Management. Each rebuttal they submitted was in response to a different

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Report. Of their approximately 40 submissions, the Ripoff Report enterprise declined to post approximately half. 233. On January 19, 2010 and January 19, 2010 Jan Smith sent emails to info@ripoffreport.com complaining that rebuttals she has submitted to Reports were not being posted. See Exhibit 19. 234. This misrepresentation that subjects can always file rebuttals creates the illusion that Reports are balanced. It gives the public a sense that both positive reports and negative content can be easily posted. This is not the case. 235. The illusion created by Defendants’ misrepresentations legitimizes the complaints against Plaintiffs, thereby aggravating the harm done to the targeted business or individual by the Content Trolling Scheme. 236. On May 5, 2009 at 11:48 a.m., Defendant Edward Magedson sent Plaintiff Raymond Mobrez an e-mail containing the following statements of fact: i. shall set you free.” ii. story” iii. “file a rebuttal to the nasty Report about you, state that you had made a mistake in the past and explain how you’ve contacted (or are contacting if the rebuttal is your sole method of contact) the author of the report to make things right with them. . . We know it works.” iv. consumers.” v. “we supply a REBUTTAL feature so that the company reported has a chance to respond by agreeing, disagreeing, or apologizing and explaining what will be done to fix the issue.” vi. “file a rebuttal that is pleasant and, if you wish, mention that you support this forum.”
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Best to respond to the report… Just file a rebuttal.. the truth “You can simply file a rebuttal and explain your side of the

“We encourage you to post a rebuttal explaining your side of

the story, but we have a uniform policy against removing reports posted by

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A true and correct copy of Mr. Magedson’s May 5, 2009 at 11:48 a.m. email to Mr. Mobrez is attached hereto. 237. In the May 5, 2009 email, Magedson adverts to his knowledge that the public is finding Reports on search engines with the statement, “Consumers are probably finding your business on search engines that would never even know about you!” 238. Defendants do not disclose their ulterior motivation for advocating their free, rebuttal service. 239. Filing a rebuttal actually hurts those victimized on the ROR website and in search results more than it helps them. Not only does it do nothing to make the Reports filed less conspicuous, but filing a Rebuttal refreshes Google’s search indexing, thereby increasing content and visits for the ROR Website site and Reports. This also raises the page ranking of the negative Report. In other words, filing a rebuttal is likely to drive the negative report up in the search rankings creating a vicious circle of attempting to minimize the harm yet, at the same time, giving these Reports more prominence. 240. Rebuttals act as fresh content, refreshing the Reports with search engines, particularly when Defendants add paid links to advertising the content in the rebuttals. See Exhibit 24, ¶¶14-16. 241. Furthermore, rebuttals do not appear in Google search results, if at all, in an intelligible context comparable to the significantly altered Reports published by the Ripoff Report enterprise that are stuffed with positive HTML text about CAP members. 242. Filing a rebuttal also requires registration and acceptance of ROR’s terms of service, which contain an Arizona venue and choice of law that clause Defendants may invoke should victims realize the effect of the Content Trolling Scheme and wish to exercise their First Amendment right of petition against Defendants in the courts.

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243. The aggravating effect of submitting a rebuttal is well observed. In or about February 2010, Tina Norris paid $600 to an SEO consultant, Reputation Defender, to successfully lower the ranking of the Reports targeting her from number one to number four in Google page rankings. Thereafter, Norris also filed a rebuttal to a Report. After she filed a rebuttal, the Report went back to the number one position, rendering any work done by the consultant useless. 244. Plaintiffs did rely on the false statements on the ROR Website on March 4, 2009 and April 3, 2009 that “the best thing you can do is to post a rebuttal.” 245. On April 3, 2009, through counsel, Plaintiffs registered with the ROR Website and thereafter posted a rebuttal. 246. Whereas on March 4, 2009, the Google search result for “Raymond Mobrez” returned a Report as third in page rank, the Google search rank for “Raymond Mobrez” currently returns a Report as the first in page rank. C. Defendants Falsely State that they have never done anything to cause Google to rank their website higher in the search results. 247. Defendants falsely misrepresent to the public that “Ripoff Report has never, ever (not now, and not in the past) done anything to cause Google to rank our website higher in search results than other sites.” This quotation appeared on the ROR website on June 26, 2009 and October 27, 2009. 248. ROR makes the following allegations on their webpage: In response to the question “I head that the Ripoff Report pays Google to get higher rankings in search results, is that true?” the Web site responds, “No. This is 100% false.” These statements appeared on the ROR website on June 26, 2009 and October 27, 2009.

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i.

“For the record – Ripoff Report has never, ever (not now, and

not in the past) done anything to cause Google to rank our website higher in search results than other sites.” Attached hereto as Exhibit 14 is a true and accurate printout from ROR’s website dated July 26, 2010 evidencing the above. 249. Ripoff Report has, in fact, done many things to support itself as a business model and cause Google to rank postings higher by circumventing punitive changes in algorithms. The website gives Google special treatment in reports to maintain their high organic Google search authority and favorable ranking. 250. Both Bing and Yahoo have discredited and penalized Defendants’ website in their search algorithms. 251. However, Ripoff Report has actively written and published titles, disclaimers, and comments to maintain favor with Google. They have changed the meaning of reports concerning Google in substantial ways to achieve that objective. For example, Defendants wrote a disclaimer that “this is not google.com the search company” on a report posted about Google Adsense. Defendants have changed the name of Sergey Brin, a Google founder, and editorialized about reports on Brin and Larry Evans. 252. The public relies on the false statement as true, and gives greater credence to the illusion that Ripoff Report is a legitimate site if it ranks so highly with common search engines like Google. Furthermore, Defendants place these misleading statements on the “Want to Sue Us” page on their website. This strategic placement allows them to take advantage of those victimized because it discourages them from asserting their rights. 253. Plaintiffs and others were damaged viewed these false statements and were damaged in money paid to IT consultants, loss of contacts and business opportunities in which they have a recognized property right and directly delayed bringing suit by intimidation.

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D.

Defendants Falsely Present Themselves As Authorities In Internet And Technology Law With Specialized Knowledge Under Circumstances that Transform Legal Opinion Into Actionable Fraud. 254. Defendants mislead the public when they state that they are “immune”

from legal action, “have never lost a case,” and present numerous contentions of law as fact. They assert that the Communications Decency Act insulates them from liability in all cases. These statements appeared on the ROR website on June 26, 2009 and October 27, 2009. Plaintiffs viewed these statements on those dates. 255. ROR makes the following claims on their webpage. Plaintiffs viewed these claims on their webpage on June 26, 2009 and October 27, 2009: i. “If you are considering sending us a notice or demand (or if you

have already done so), this page is intended to provide you with information that may help you to better understand the situation and your rights, as well as the rights of the people who post reports here. You need to understand that threats against Ripoff Report are not effective, nor will they result in the removal of any reports. Here's why.” ii. “Because we will not remove reports, Ripoff Report has been sued on many occasions based on the content which our users have created and posted. If you are considering suing Ripoff Report because of a report which you claim is defamatory, you should be aware that to date, Ripoff Report has never lost such a case (with one exception; explained below). This is because of a federal law called the Communications Decency Act or "CDA", 47 U.S.C. § 230. Because this important law is not well known, we want to take a moment to explain the law, and to also explain that the filing of frivolous lawsuits can have serious consequences for those who file them, both parties and their attorneys.” iii. “Because the reports on Ripoff Report are authored by users of the site, we cannot be legally regarded as the "publisher or speaker" of the reports contained here, and hence we are not liable for reports even if they contain false or
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inaccurate information. The same law applies to sites like FaceBook, MySpace, and CraigsList – users who post information on these sites are responsible for what they write, but the operators of the sites are not.” iv. “Based on the protection extended by the CDA, Ripoff Report has successfully defended more than 20 lawsuits in both state and federal courts. Each time, the courts have consistently found that the CDA shields Ripoff Report from any claims seeking to treat it as the speaker or publisher of information posted by a third party.” v. vi. “You can always sue the author if you want, but you can’t sue “On April 3, 2008, the Ninth Circuit Court of Appeals issued an Ripoff Report just because we provide a forum for speech.” opinion in a case called Fair Housing Council of San Fernando Valley v. Roommates.com, L.L.C., 521 F.3d 1157 (9th Cir. 2008). Some people (okay, lawyers, mostly), initially argued that Roommates narrowed the CDA significantly, exposing Ripoff Report to liability even with regard to information posted by third parties. Sorry folks, but since Roommates was decided, other courts have agreed that the facts of the case are unique and the outcome is really limited to those facts. The decision in GW Equity v. Xcentric Ventures cited above specifically discusses the Ninth Circuit’s decision in Roommates in detail and then concludes that it does not affect our immunity under the CDA.” vii. parties.” viii. “Ripoff Report is not liable for statements posted by a third party, and it has never lost a case involving such statements, so it will not remove complaints even if you sue.” ix. “Filing a lawsuit will, however, guarantee the removal of one thing -- a LOT of money from your wallet and into an attorney's pocket.” “Whether or not you choose to post a rebuttal, under the CDA you cannot hold Ripoff Report legally responsible for material written by third

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x.

“First, Rule 11 of the Federal Rules of Civil Procedure, and

each state court's rules, generally require that all pleadings, including initial Complaints, must be presented in good faith, after a reasonable investigation into the facts and the law, and not made for an improper purpose such as harassment. What this means in plain English is that if you file a lawsuit which you know contains false claims, or if you sue without first conducting a reasonable investigation as to the law as it may pertain to the facts of your case (such as determining the identity of the author of the report(s) you are concerned about), you and/or your attorney can be subject to serious sanctions at the judge's discretion. Many who have sued settled with us and some have paid some or all of our attorney's fees. Other times we have defended the cases for years running up large legal bills for both sides. Either way, we never paid out a dime in settlement or damages to anyone who has sued us.” xi. “In addition to penalties a judge may issue, those who would threaten us need to be aware of another law which imposes civil liability on anyone who files a frivolous lawsuit. This claim is known as "wrongful use of civil proceedings" and it is defined by § 674 of the Restatement (Second) of Torts as follows: (a) he acts without probable cause, and primarily for a purpose other than that of securing the proper adjudication of the claim in which the proceedings are based, and (b) except when they are ex parte, the proceedings have terminated in favor of the person against whom they are brought.” xii. “Because Ripoff Report is immune from liability under the CDA for defamation-based and related claims, any suit that seeks to impose liability for the speech of our users is, by definition, an action brought "without probable cause". We encourage the prompt and fair resolution of disputes between Ripoff Report authors and those who are the subject of Ripoff Reports. However, Ripoff Report wants to be clear that it accepts no liability for the speech of its users, and it will vigorously defend any litigation brought against us which seeks to circumvent the CDA. In addition, any suit filed against us without probable cause
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may subject the complaining party and/or their attorneys to liability in the State of Arizona for wrongful use of civil proceedings. We don't mean to sound harsh, but if you knowingly file a frivolous lawsuit against us, regardless of where your case is filed, you and/or your lawyers can be subject to a lawsuit in Arizona in which a jury could, if appropriate, award both substantial compensatory and punitive damages against you.” xiii. “Finally, you need to be aware that if you file a lawsuit simply to harass us, not only will this not work, it will very likely end up being EXTREMELY expensive for you. Due to the number of meritless cases we have had to defend, Ripoff Report has adopted a very strict policy about lawsuits -- once Ripoff Report is forced to appear in a case, it will not stipulate to a dismissal of the case unless the party who filed the action agrees to pay Ripoff Report's attorney fees. There will be no exceptions. If you conduct a thorough investigation BEFORE you sue and you believe you have a valid case despite the CDA, it is your right to pursue your case and prove it in court. However, once you file a lawsuit, be prepared to either take it all the way to a decision on the merits or pay Ripoff Report's attorney fees because Ripoff Report will not stipulate to a dismissal without compensation.” Attached hereto as Exhibit 15 is a true and accurate printout from ROR’s website dated July 26, 2010 evidencing the above. 256. On May 5, 2009 at 11:48 a.m., Defendant Edward Magedson sent Plaintiff Raymond Mobrez an e-mail containing the following claims: i. “Be warned. To those of you who threaten to sue, be prepared

to go the long haul, and, when you want to do a walk away because you realize you cannot and will not win because you filed a frivolous law suit, …you will be paying for our legal bills and in some cases and then some, before we will let you out of the case. .. Just ask anyone who has sued us for years. Many of them will not admit to you that they paid us.. but they do.. If you are thinking of suing us, I hope you are personally prepared for this. We are.”
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ii.

“[T]here have been a lot more legal superior court decisions,

and other lower court decisions – some published decisions. ALL IN OUR FAVOR. And We have been sued more than 2 dozen times and never, that’s NEVER LOST A CASE. Suing us will only get you more publicity and additional listings on search engines.” iii. “Anyone thinking of coming after Rip-off Report (filing a lawsuit) will get nowhere and will only, more than likely, get more bad publicity, because the lawsuit is public information.” (attached hereto as Exhibit 10 is a true and accurate copy of Mr. Magedson’s May 5, 2009 at 11:48 a.m email to Mr. Mobrez.). 257. Many of these contentions appearing on the “Want to Sue Ripoff Report?” section of Defendants website are either false or opinion wrongly presented as fact or partial truths. Defendants have settled cases and defaulted on cases, which is considered tantamount to an unfavorable resolution. Moreover, Courts have held that CDA immunity does not apply to claims like RICO that do not attempt to hold Ripoff Report as the speaker of third party content. 258. These misrepresentations result in members of the public failing to bring suit in an attempt to assert their legal rights. Many of them feel intimidated from even exploring any legal recourse. Moreover, these statements help to establish the credibility of the site and content appearing on the site, further misleading the public to believe that Ripoff Report is a legitimate website. Plaintiffs viewed these misleading statements and relied detrimentally thereon. 259. Plaintiffs were injured both by the public’s perception and in the form of fees paid to IT consultants, loss of business over time and lost contract, both for AEI’s business and lost real estate commissions on transactions for Mobrez and Llaneras. 260. If Plaintiffs had known the true facts they would have sued ROR earlier and not delayed in trying to resolve this issue by any means other than a
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lawsuit, thereby taking early action to remedy the erosion in their business and property interests and loss of valuable contracts. E. Defendants falsely state that they do no filter or suppress reports, unlike the Better Business Bureau. 261. Plaintiffs viewed the following statements on the Ripoff Report website on August 12, 2009. The website also currently as of July 26, 2010 contains the following claims: i. “Unlike the Better Business Bureau, Ripoff Report does not hide reports of "satisfied" complaints. ALL complaints remain public and unedited in order to create a working history on the company or individual in question.” 262. Plaintiffs viewed the following statements on the Ripoff Report website on both June 26, 2009 and October 27, 2009. The website also currently contains the following claims: i. “First, this site is most effective when all complaints are maintained and preserved so that over time patterns of truly bad business practices are exposed. If we removed reports after a certain period of time, this would provide consumers with less information to use when evaluating a company. Unlike the Better Business Bureau (which deletes complaints after just 36 months), we maintain a permanent record of all complaints. This ensures that our viewers have more information rather than less.” 263. As mentioned above, Ripoff report does not post negative reports about certain businesses, including negative reports about CAP members and reports about CAP, itself and its agents. The public relies on these false statements, giving more credence to the negative reports. 264. Moreover, Defendants will not post positive reports. 265. As set forth above, plaintiffs were injured by fees paid to IT contractors and loss of business and contracts. If Plaintiffs had known the true facts they would have sued ROR earlier and not delayed in trying to resolve this issue by
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any means other than a lawsuit, thereby taking early action to remedy the erosion in their business and property interests and loss of valuable contracts. F. Defendants Mislead The Public When They Present CAP Members As Safe, Reliable, And Trustworthy. 266. Defendants state that they investigate the truth to posts about CAP members. They portray this process as reliable and accurate. Furthermore, they portray CAP members as those businesses that are dedicated to improving their customer service. 267. For example, ROR states: i. “Rip-off Report Investigation: John Beck – Free And Clear – Mentoring of America pledges to resolve complaints & address inquiries from the past, and in the future. Commitment to Rip-off Report Corporate Advocacy Business Remediation & Customer Satisfaction Program. Consumers can feel confident & secure when doing business with John Beck – commitment to 100% customer satisfaction – fulfilling commitment to provide excellent customer service – safeguards for their clients.” ii. “UPDATE Rip-off Report Investigation: John Beck Pledges To Resolve Complaints. – commitment to 100% customer satisfaction – Consumers can feel confident & secure when doing business with John Beck.” (A true and correct copy of this page of ROR dated July 26, 2010 is attached hereto as Exhibit “16.” 268. John Beck is currently being investigated by the Federal Trade Commission. In addition, the FTC, on its website, advises individuals and businesses that John Beck is running a scam and to not to business with him. (A true and correct copy of the aforementioned page is attached hereto as Exhibit “17.”

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269. In fact, Defendants conduct CAP investigations strictly through the email and Defendant Ed Magedson is the only one involved in the process. A true and correct copy of portions of the 30(b)(6) deposition of Ed Magedson evidencing the above is attached to the Declaration of Daniel Blackert as Exhibit 18. 270. In fact, anyone can pay to have favorable commentary featured on their reports via joining the CAP. The public relies on these statements when they infer that non-CAP members are not committed to excellent customer service, unlike CAP members. 271. As set forth above, Plaintiffs were injured by fees paid to IT contractors and loss of business and contracts. 272. If Plaintiffs had known the true facts they would have sued ROR earlier and not delayed in trying to resolve this issue by any means other than a lawsuit, thereby taking early action to remedy the erosion in their business and property interests and loss of valuable contracts. FIRST CLAIM FOR RELIEF VIOLATION OF 18 U.S.C. § 1962(c) – Civil RICO (Against All Defendants) 273. Plaintiffs re-allege and incorporate herein all preceding paragraphs as fully set forth herein. 274. Xcentric and Magedson, both in his individual capacity and as Manager of Xcentric and as Editor of Ripoff Report, and each of them, are “persons” as defined under 18 U.S.C. § 1961(3) and 18 U.S.C. § 1962(c). 275. At all relevant times herein, Defendants Xcentric and Magedson were employed by and/or affiliated with Ripoff Report, an “enterprise” or “association in fact enterprise” within the meaning of 18 U.S.C. §§ 1961(4) and 1962(c), located in this judicial district and elsewhere in California and other states, which is used to sell goods and services in interstate commerce, and was engaged in

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activities that affected interstate commerce using interstate wire (the “ROR Enterprise”). 276. Plaintiffs are informed and believe and thereon allege that the ROR Enterprise also comprised an individual named “Karen” or Karen@ripoffreport.com,, the identity of whom is presently unknown, and other persons presently unknown, including those responsible for writing the “So You Want to Sue Ripoff Report” portions of the ROR Website and Xcentric and Magedson’s law firm or legal team to the extent they committed the predicate acts alleged herein. 277. Defendant Magedson was and is associated with Defendant Xcentric Ventures, LLC, and has control over this enterprise such that he can conduct and participate in its conduct, either directly or indirectly, in the operation and management of the enterprise. 278. Defendants Ed Magedson and Xcentric Ventures, LLC, own, operate, and/or control the Web site located at www.RipoffReport.com (“Ripoff Report”). 279. Defendants use this Web site as a vehicle to defraud the public. The fraudulent claims made in furtherance of that scheme constitute violations of 18 U.S.C. § 1343, particularly where all communications are made over the Internet. 280. Each communication and representation made by the Defendant via electronic mail and web publication constitutes the transmittal by means of wire communication in interstate commerce of signals, sounds, or writings for the purpose of executing or in connection with the aforementioned schemes and artifices to defraud. 281. Defendants knew or had reason to know that these transmissions were in furtherance of executing these schemes or artifices or were incidental to an essential part of these schemes and artifices. 282. As previously described, the communication and representations made by the Defendants are materially false. Defendants made or caused these

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transmissions to be made with the specific intent of defrauding Plaintiffs and others similarly situated. 283. Each of these transmissions furthered the aforementioned scheme and artifices to defraud, which were intended to and did proximately cause injury to Plaintiffs and others in their business or property through its scheme to defraud. 284. Defendants engaged in a pattern of racketeering activity consisting of at least two predicate acts of racketeering by each individual Defendant. 285. Defendant Xcentric engaged in a pattern of racketeering, with the use of wires to facilitate a fraudulent scheme including transmissions through the ROR Website on March 4, 2009, April 3, 2009, June 26, 2009, August 12, 2009, October 27, 2009, and July 26, 2010, and continuing, as alleged above. 286. Defendant Magedson engaged in a pattern of racketeering by in separate emails sent to Plaintiff Mobrez on May 5, 2010 at 11:48 a.m., May 12, 2010 at 6:04 p.m., and July 24, 2010 at 6:31 p.m. and as otherwise above alleged in furtherance, pattern of wire fraud entailed at least two acts of racketeering activity by Defendants, at least one of which occurred within ten years after the commission of a prior act of racketeering activity, and constitute a continuous and related pattern or racketeering as defined in 18 U.S.C. 1961(1) and (5). 287. This pattern of wire fraud entailed at least two acts of racketeering activity by Defendants, at least one of which occurred within ten years after the commission of a prior act of racketeering activity, and constitute a continuous and related pattern or racketeering as defined in 18 U.S.C. 1961(1) and (5). 288. Plaintiffs were the direct and intended victims of the Content Trolling Scheme, and lost valuable business and property interests as a direct result thereby. Plaintiffs, and each of them, have been injured in their business and property by reason of the foregoing violations of 18 U.S.C. § 1962(d) as alleged in this claim in an amount to be determined at trial. Plaintiff is also entitled to treble damages, as well as other relief which is necessary and proper, including reasonable attorneys’ fees and costs, including but not limited to the following:
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a. b. $7,400 to date; c. d. e. f. g. h. i.

Legal fees incurred as a result of litigating the present case in the Costs expended litigating the present case in the amount of Amounts invested in assets, business, goodwill and operations of Rented office space to date: $347,983 Phone and Internet Communications to date: $34,809 Move-in Costs to date: $31,950 Accrued start-up costs to date: $12,500 Miscellaneous expenses to date: $8,900 Amounts expended in traveling to Washington, DC and

amount of $21,700 to date;

Asia Economic Institute, LLC to date of at least:

advocating to representatives and lawmakers for a change in the statute in the amount $2,500 to date j. Salaries or fees paid to SEO Experts, IT consultants, LAMP developers, software licenses, computer programmers and other consultants, contractors and vendors or services to the business of AEI; k. Cost of registering and maintaining domain names and hosting services and servers to host and operate the websites of AEI and AEI’s educational, publishing and business missions; l. Real estate transaction broker or license fees and commissions, and other existing and prospective property interests in commercial transactions, on which Mobrez and Llaneras would earn fees, and to which Plaintiffs Mobrez and Llaneras were entitled and were lost by reason of Defendants’ acts complained of herein; SECOND CLAIM FOR RELIEF VIOLATION OF 18 U.S.C. § 1962(d) – RICO Conspiracy (Against All Defendants)
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289. Asia Economic Institute re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 290. Magedson and other unnamed individuals associated with Xcentric Ventures, LLC, and Ed Magedson, have conspired and agreed to violate 18 U.S.C. § 1962(c) by agreeing to conduct an enterprise affecting interstate commerce, directly or indirectly, through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(d). The acts in furtherance of this conspiracy are alleged herein. 291. Plaintiffs have been injured in their business and property by reason of the foregoing violations of 18 U.S.C. § 1962(d) as alleged in this claim in an amount to be determined at trial. Plaintiff is also entitled to treble damages, as well as other relief which is necessary and proper, including reasonable attorneys’ fees and costs. THIRD CLAIM FOR RELIEF UNFAIR BUSINESS PRACTICES - CALIFORNIA BUSINESS & PROFESSIONS CODE § 17200, et seq.) (Against All Defendants) 292. Asia Economic Institute re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 293. Plaintiffs have standing pursuant to California Business and Professional Code Section 17204. 294. Plaintiffs allege violations of California Business & Professions Code § 17200 on behalf of themselves and the public (Private Attorney General). 295. Defendants’ acts and practices as alleged herein constitute unlawful, unfair, and/or fraudulent business practices in violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. 296. Defendants are engaged in unlawful business acts or practices by, among other things:
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296. Defendants have repeatedly and intentionally used their Websites as a scheme t7 obtain money from AEI and other companies by means of false and fraudulent representations made by the Defendant concerning the legitimacy of Defendants’ Web site. This conduct amounts to wire fraud under 18 U.S.C. § 1343. 298. Defendants are engaged in unfair business acts or practices by, among other things: 299. Defendants have engaged in conduct the utility of which is outweighed by the gravity of the consequences to the Plaintiffs and the public. 300. Defendants have engaged in conduct that is immoral, unethical, unscrupulous, and substantially injurious to Plaintiff and the public. 301. Defendants have engaged in conduct that undermines and violates the policies set out in 18 U.S.C. § 1962(c) and 18 U.S.C. § 1343. 302. Defendants are engaged in fraudulent business acts or practices by, among other things: a. Defendants represent themselves as consumer advocates. However, this description is false and misleading for reasons stated above including: b. Defendants allow users to post personal complaints and air grievances that fall well outside the definition of consumerism. Such complaints include allegations of adultery, sexual assault, and pedophilia. c. Defendants mislead the public into believing they have presented an unbiased description of the targeted business or individual, However, Defendants refuse to publish positive reports concerning these targets and, on occasion, fail to publish rebuttals disputing the allegations contained in the negative report. d. Defendants label businesses or individuals enrolled in the Corporate Advocacy Program as “verified safe” without investigating the veracity of this statement.
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e. Defendants solicit false and defamatory complaints against Plaintiffs and others so that they may profit from sales of their “Ripoff Revenge” guidebook and membership in their Corporate Advocacy Program. 303. Defendants’ statements about products and services offered for sale by participants in the CAP and Verified Safe Program are “endorsements” within the meaning of Section 5 of the FTC Act, 15 U.S.C. § 45, because consumers are likely to believe such statements reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser. 304. Defendants fail to disclose material information that would be likely to influence a consumer regarding the terms of Defendants’ endorsements and testimonials under the Corporate Advocacy Program and Verified Safe Program. 305. Defendants have failed, and continue to fail, to disclose to consumers in advertising the fact or the amount of material considerations paid to Defendants for endorsing or “Verifying Safe” a business, in violation of Section 5 of the FTC Act, 15 U.S.C. § 5, and Federal Trade Commission 16 C.F.R. Part 255.0 et seq. as updated effective December 1, 2009 expressly to issue new Guides that confirm Section 5 of the FTC Act applies to statements on blogs, and Internet communities. 306. Defendants are subject to liability for false or unsubstantiated statements made through these endorsements. 307. Without injunctive relief, the Plaintiffs and others similarly situated will continued to be harmed by the Defendants’ unlawful, unfair and fraudulent business practices. In addition, Plaintiff is entitled to recover its costs of suit and attorney. FOURTH CLAIM FOR RELIEF

27

COMMON LAW DEFAMATION
28

(Against All Defendants)
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308. Asia Economic Institute re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 309. Defendants published defamatory materials on Defendants’ websites regarding Plaintiffs. 310. The publications contain false and misleading information and have brought Plaintiffs into disrepute among members of the marketplace. In addition, said defamatory comments have harmed Plaintiffs’ integrity, good-will, reputation, and good name in the community. 311. Defendants knew or should have known that the defamatory posts would cause serious harm to Plaintiffs. Defendants intended that the defamatory posts impact the way the public views Plaintiffs, as well as their business. 312. Defendants knew that the publications included false information or otherwise acted with reckless disregard of the truth or falsity contained in their publications. Further, Defendants refuse to investigate the truth or falsity of such statements to the detriment of Plaintiffs, as well as other businesses and individuals. 313. Defendants’ publications damaged Plaintiffs’ business reputation and have prejudiced it in the conduct of its business, and have deterred customers and potential customers from dealing with it. 314. Plaintiffs have been injured in its reputation, business, and property by reason of Defendants’ publications in an amount to be determined at trial. FIFTH CLAIM FOR RELIEF DEFAMATION PER SE (Against All Defendants) 315. Asia Economic Institute re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 316. Defendants published the statements attached hereto at “Exhibit 22.”
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317. The Reports published by Defendants regarding Plaintiff are false and were published with malice and reckless disregard for the truth or falsity of such stories with intent to injure Plaintiff, its business reputation, and to illegally divert prospective employees from the Plaintiff’s employ. 318. Defendants do not verify the truth or accuracy of the stories contained on their websites. Defendants publish the stories and hold Plaintiffs out to the public as a “rip-off.” 319. The stories published and written by the Defendants contain false information about the Plaintiffs’ business relationships and falsely allege the Plaintiffs are engaged in criminal conduct. Such statements include that AEI is “laundering money,” that AEI “lie cheat tax fraud,” “reduce pay illegally,” and is a “SCAM.” These false statements constitute defamation per se under all applicable laws. 320. The false statements of fact published on the Defendants’ website are unambiguous and when read by the public searching for the Plaintiffs, the libelous nature of such statements are clear. A reasonable person would have understood these statements to mean that Plaintiffs have committed a crime. 321. As a direct and proximate result, Plaintiffs have been damaged in its good name and reputation, has suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost prospective employees, and it continue to suffer increasing damages on a daily basis. Defendants’ defamatory publication entitles AEI to compensatory and punitive damages in an amount to be determined at trial. SIXTH CAUSE OF ACTION FALSE LIGHT (Against All Defendants)

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322. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 323. Defendants’ statements have placed Plaintiffs in a false light by representing Plaintiffs as scam artists, criminals, racists, unqualified, and incapable of providing a valuable service to the community. It is important to note that Plaintiffs have provided valuable resources for the public and wish to continue to do so. However, Defendants so-called “rip-off reports” have tainted Plaintiffs business, so much so that Plaintiffs have lost and continue to lose countless business relationships and employees. In other words, the defamatory posts posted on Defendants’ websites have halted Plaintiffs’ business. 324. The false light in which Plaintiffs have been placed as a result of the Defendants’ statements would be highly offensive to a reasonable person in the Plaintiffs’ position. 325. Defendants knew that the statements were false, or Defendants acted in reckless disregard for the truth or falsity of those statements. 326. As a direct and proximate result of Defendants’ wrongful statements, Plaintiffs have sustained harm to their business in an amount to be proven at trial. SEVENTH CAUSE OF ACTION INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC RELATIONS (Against All Defendants) 327. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 328. AEI had valid contractual relationships with current and prospective employees and had expected relationships with persons who, but for Defendant’s libelous publications, would have entered into valid contractual relationships.

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329. Defendants knew, when falsely and publicly making these defamatory statements about the Plaintiffs, that Plaintiffs had these valuable contracts and business expectancies. 330. Defendants intentionally and wrongfully interfered with these relationships by knowingly publishing, creating, and soliciting negative, false, and defamatory content in exchange for their own business profit. 331. As a result of the Defendants’ wrongful conduct, the relationship between the Plaintiffs and its employees has been disrupted. In fact, one complainant claims that he was “considering starting a position at this company…” until he “came home and googled his name, and found all these bad reports.” The complaint further asserts that “as a result of these reports, [he is] going to blow him off.” 332. As a direct and proximate results of the foregoing wrongful acts, Plaintiffs have been damaged in their good name and reputation, have suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost current as well as prospective employees, and it continues to suffer damages. Plaintiffs have also lost valuable contracts. Defendants’ tortuous interference with AEI’s business relations entitles AEI to compensatory and punitive damages in an amount to be determined at trial. EIGHTH CAUSE OF ACTION NEGLIGENT INTERFERENCE WITH PROSPECTIVE ECONOMIC RELATIONS (Against All Defendants) 333. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 334. AEI had valid contractual relationships with current and prospective employees and had expected relationships with persons who, but for Defendant’s libelous publications, would have entered into valid contractual relationships.
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335. Defendants knew, when falsely and publicly making these defamatory statements about the Plaintiffs, that Plaintiffs had these valuable contracts and business expectancies. 336. Defendants negligently interfered with these relationships by knowingly publishing and creating negative, false, and defamatory content in exchange for their own business profit. 337. The relationships between the Plaintiffs and its employees were thereafter disrupted by the Defendants’ conduct. 338. As a direct and proximate results of the foregoing wrongful acts, Plaintiffs have been damaged in their good name and reputation, have suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost current as well as prospective employees, and it continues to suffer damages. Plaintiffs have also lost valuable contracts. Defendants’ tortuous interference with AEI’s business relations entitles AEI to compensatory and punitive damages in an amount to be determined at trial. NINTH CAUSE OF ACTION NEGLIGENT INTERFERENCE WITH ECONOMIC RELATIONS (Against All Defendants) 339. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 340. AEI had a valid contractual relationships with current and prospective employees. 341. Defendants knew, when falsely and publicly making these defamatory statements about the Plaintiffs, that Plaintiffs had these valuable contracts. 342. Defendants intentionally and wrongfully interfered with these relationships by knowingly publishing and creating negative, false, and defamatory content in exchange for their own business profit. Defendants intentionally and
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wrongfully caused these employees to breach their employment contracts with Plaintiffs. 343. As a result of the Defendants’ wrongful conduct, the relationship between the Plaintiffs and its employees has been disrupted. In fact, one complainant claims that he was “considering starting a position at this company…” until he “came home and googled his name, and found all these bad reports.” The complaint further asserts that “as a result of these reports, [he is] going to blow him off.” 344. Defendant’s wrongful conduct is, therefore, a substantial factor in causing Plaintiffs’ harm. 345. As a direct and proximate results of the foregoing wrongful acts, Plaintiffs have been damaged in their good name and reputation, have suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost current as well as prospective employees, and it continues to suffer damages. Plaintiffs have also lost valuable contracts. Defendants’ tortuous interference with AEI’s contractual relations entitles AEI to compensatory and punitive damages in an amount to be determined at trial. TENTH CAUSE OF ACTION INJUNCTION (Against All Defendants) 346. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 347. Defendants have wrongfully and unlawfully solicited, developed, and published on the Websites numerous false and misleading statements of fact concerning AEI and its owners. 348. On or about May 5, 2009, Plaintiff Mobrez requested that defendants remove these false and defamatory statements from the Ripoffreport.com website. Defendants have refused, and still refuse, to remove false and misleading statements after repeated requests by the Plaintiffs.
First Amended Complaint - 77

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349. Plaintiffs have been and will continue to suffer immediate and irreparable damage if Defendants are not enjoined during the pendency of this lawsuit from disseminating or publishing false, misleading, and defamatory comments regarding AEI, Mobrez, and Llaneras. The dissemination or publication of these false, misleading, and defamatory posts continues to impact AEI’s business opportunities and dissuades prospective clients from doing business with AEI. 350. Plaintiff has no adequate remedy at law for the injuries being suffered as the Plaintiff will be forced to institute a multiplicity of suits to obtain adequate compensation for their injuries. 351. There is a substantial likelihood that Plaintiffs will prevail on the merits. Defendants have been repeatedly notified to cease and desist disseminating or publishing these defamatory statements concerning AEI and its business, but they have continued to host such statements on their Websites with the understanding that such disparaging acts would be detrimental to the Plaintiffs. 352. Any harm associated with the entry of a preliminary injunction is outweighed by the potential damage to AEI’s goodwill and reputation. Defendants will not suffer monetary losses if they are forced to remove the false and defamatory statements regarding the Plaintiffs and to remove references to Plaintiffs from Defendants’ HTML. 353. Further, the public interest will be served by preventing the dissemination of false and misleading statements about other businesses and individuals. 354. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 355. Plaintiffs further ask the Court to set its application for injunctive relief for a full trial on the issue in this application, and after the trial, to issue a permanent injunction against Defendants from disseminating or publishing false, misleading, and defamatory statements concerning the Plaintiffs.
First Amended Complaint - 78

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ELEVENTH CAUSE OF ACTION DECEIT CALIFORNIA CIVIL CODE §§ 1709, 1710) (Against All Defendants) 356. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 357. Cal. Civ. Code § 1709 prohibits willful deception of another with intent to induce a detrimental change in position. 358. Cal. Civ. Code § 1710 provides in relevant part that “deceit…is either: I. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; II. The assertion, as a fact, of that which is not true, by one who does not believe it to be true; III. The suppression of a fact, by one who is bound to disclose it, or who give information of other facts which are likely to mislead for want of communication of that fact; or, IV. A promise, made without any intention of performing it.” 359. Defendants have and continue to violate Cal. Civ. Code § 1709 by willfully deceiving Plaintiffs and others with the intent to induce a detrimental change in their positive. 360. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1710(1) by suggesting that: (1) they have not and will not remove reports published on their Web site; (2) that victims have the option of filing a free rebuttal to the negative complaints; (3) that filing a rebuttal has only a positive effect; (4) that Defendants have done nothing to curry favor with Google; (5) that Defendants do not filter or suppress reports; and (6) that members of the CAP have been investigated and found to be safe and secure. At the time these suggestions were made, Defendants did not believe this to be true.

First Amended Complaint - 79

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361. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1710(2) by asserting that: (1) they have not and will not remove reports published on their Web site; (2) that victims have the option of filing a free rebuttal to the negative complaints; (3) that filing a rebuttal has only a positive effect; (4) that Defendants have done nothing to curry favor with Google; (5) that Defendants do not filter or suppress reports; and (6) that members of the CAP have been investigated and found to be safe and secure. At the time these assertions were made, Defendants did not believe this to be true. 362. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1710(3) by suppressing the fact that: (1) Defendants have removed reports; (2) victims of Defendants’ Web site have been unable to file a free rebuttal; (3) filing a rebuttal gives more prominence to the report on Internet search results; (4) that Defendants have edited reports concerning Google to maintain its good favor; (5) that Defendants will not post positive reports nor will they publish reports concerning members of their CAP; and (6) CAP members are not investigated. 363. Plaintiffs were harmed by these allegations. Had they known the true facts, Plaintiffs would not have hired IT consultants to repair their online reputation and would not have filed a rebuttal with the Defendants. 364. Pursuant to Cal. Civ. Code § 1709, Defendants are liable for any damage which was proximately caused to Plaintiffs as a result of Defendants’ deceit. TWELFTH CAUSE OF ACTION FRAUD (CAL. CIVIL CODE § 1572) 365. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein.
First Amended Complaint - 80

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366. Cal. Civ. Code § 1572 provides that “[a]ctual fraud…consists of any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: I. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; II. The positive assertion, in a manner not warranted by the information the person making it, of that which is not true, though he believes it to be true; III. The suppression of that which is true, by one having knowledge or belief of the fact; IV. A promise made without any intention of performing it; or V. Any other act fitted to deceive. 367. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572(1) by suggesting that: (1) they have not and will not remove reports published on their Web site; (2) that victims have the option of filing a free rebuttal to the negative complaints; (3) that filing a rebuttal has only a positive effect; (4) that Defendants have done nothing to curry favor with Google; (5) hat Defendants do not filter or suppress reports; and (6) that members of the CAP have been investigated and found to be safe and secure. At the time these suggestions were made, Defendants did not believe this to be true. 368. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572(2) by asserting that: they have not and will not remove Reports published on the ROR Website; (2) that victims have the option of filing a free rebuttal to the negative complaints; (3) that filing a rebuttal has only a positive effect; (4) that Defendants have done nothing to curry favor with Google; (5) that Defendants do not filter, change or suppress Reports. At the time these assertions were made, Defendants did not believe this to be true. 369. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572(3) by suppressing the fact that: (1) Defendants have
First Amended Complaint - 81

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removed Reports, and for substantial sums of money; (2) victims have been unable to file free rebuttals; (3) filing a rebuttal gives more prominence to the Report on Internet search results; (4) that Defendants have edited reports concerning Google to maintain its good favor; and (5) that Defendants will not post positive reports nor will they publish reports concerning members of their CAP. 370. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572(5) by making false misrepresentations which were intended to lure targeted businesses and individuals into paying to enroll in CAP and otherwise put victims in a helpless, desperate position. 371. As a direct and proximate result of Defendants’ actions, Plaintiffs will continue to suffer damages. WHEREFORE, Plaintiffs pray for judgment against defendants: 1. For general damages according to proof, including but not limited to the following: a. Legal fees incurred as a result of litigating the present case in the amount of $21,700 to date; b. Costs expended litigating the present case in the amount of $7,400 to date; c. Amounts invested in assets, business, goodwill and operations of Asia Economic Institute, LLC to date of at least: d. Rented office space to date: $347,983 e. Phone and Internet Communications to date: $34,809 f. Move-in Costs to date: $31,950 g. Accrued start-up costs to date: $12,500 h. Miscellaneous expenses to date: $8,900

First Amended Complaint - 82

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i. Amounts expended in traveling to Washington, DC and advocating to representatives and lawmakers for a change in the statute in the amount $2,500 to date j. Salaries or fees paid to SEO Experts, IT consultants, LAMP developers, software licenses, computer programmers and other consultants, contractors and vendors or services to the business of AEI; k. Cost of registering and maintaining domain names and hosting services and servers to host and operate the websites of AEI and AEI’s educational, publishing and business missions; l. Real estate transaction broker or license fees and commissions, and other existing and prospective property interests in commercial transactions, on which Mobrez and Llaneras would earn fees, and to which Plaintiffs Mobrez and Llaneras were entitled and were lost by reason of Defendants’ acts complained of herein; 2. For special damages according to proof; 3. For punitive damages according to proof; 4. For violations of sections 1962(c) and 1962(d) of the Racketeer Influenced and Corrupt Organizations Act (RICO), codified at 18 U.S.C. §§ 1962(c) and 1962(d), three times Plaintiffs’ actual damages; 5. For a preliminary injunction requiring Defendants to remove from the Website any false and defamatory statements concerning AEI or its employees and prohibiting Defendants from later publishing such statements on the Websites; 6. For a permanent injunction requiring Defendants to remove from the ROR Website, both in Reports and in associated HTML, false, defamatory or negative statements or keywords; 7. For prejudgment interest at the legal rate; 8. For costs of suit incurred herein;
First Amended Complaint - 83

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9. For attorneys’ fees; and 10.For such other and further relief as the Court may deem just and proper. DATED: July 27, 2010 /s/ Daniel F. Blackert By: DANIEL F. BLACKERT LISA J. BORODKIN Attorneys for Plaintiffs, Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras

DEMAND FOR JURY TRIAL Plaintiffs Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras hereby demand a trial by jury. DATED: July 27, 2010

17 18 19 20 21 22 23 24 25 26 27 28

By: DANIEL F. BLACKERT LISA J. BORODKIN Attorneys for Plaintiffs Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras

First Amended Complaint - 84

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 253 of 439

Exhibit K

Page 1 of 4 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 254 of 439 David Gingras
From: Sent: To: Cc: lborodkin@gmail.com on behalf of Lisa Borodkin [lisa@lisaborodkin.com] Thursday, July 15, 2010 5:48 PM <david@ripoffreport.com>; Maria Crimi Speth; paul@berra.org Daniel Blackert; alexandra@asiaecon.org; kristi@asiaecon.org

Subject: AEI v. Xcentric: Laymen's Description of theory of RICO Wire Fraud

Counsel, Pursuant to Magistrate Walsh's instructions, this is a rough, informal outline, in laymen's terms of the current theories solely of wire fraud, 18 U.S.C. Section 1343, as a predicate act of RICO, 18 U.S.C. Section 1964(c) and (d). Please keep in mind we are following the elements as articulated in Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, __, 128 S. Ct. 2131, 2145 (2008). This is solely for discussion purposes. The statements themselves are generalized summaries of what an ordinary person understands, not necessarily exact statements as they would be in the complaint, and we reserve the right to amend or supplement them in the amended complaint. 1. There is a scheme to defraud, through use of the wires in interstate commerce, through Defendants' false statements on websites and emails that "we never take reports down" or "reports never come down" or "reports always stay up." The true facts are that reports do come down. For example, an entire category of reports under "Suspicious Activites" included reports about Jan Smith and Bob Sullivan that are no longer on the website. The scheme to defraud affected Plaintiffs in that there is a wide perception through the Internet and public at large that reports will always appear, it is useless to do anything but pay Defendants to be in CAP or pay an IT contractor consultant to repair reputation. Plaintiffs did pay money to such a consultant, causing loss, in accordance with Bridge. 2. There is a scheme to defraud, through the wires, though Defendants' false statement "You can always file a rebuttal," or "Anyone can file a free rebuttal". The true facts are that Defendants make it easy to file reports, but much less easy than filing rebuttals. For example, Tina Norris spend a day with a team of employees attempting to file positive rebuttals, on advice of her counsel in the Minnesota action. Of 40 attempts, approximately 20 rebuttals never posted. Others such as Jan Smith had similar experiences. The true facts are that sometimes you cannot file a rebuttal. The scheme to defraud affected Plaintiffs in that the false statements create the widespread public impression that reports are even and balanced to draw the false conclusion that the subjects of the report did not attempt to respond to customer complaints. Plaintiffs were proximately damaged by the public's reliance on such false statements, through fees to IT consultants and lost contracts in accordance with Bridge. 3. There is a scheme to defraud, through the wires, through Defendants' false statements on the Internet and in emails that "the best thing is to file a rebuttal," "best to file a rebuttal," "filing a rebuttal will help"

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Page 2 of 4 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 255 of 439 or recommendations to file a rebuttal as a step in "how to repair your online reputation." The true facts are that filing a rebuttal does not help the subjects of the reports seeking to make the harmful reports less conspicuous. Unknown to the recipients of such advice, filing a rebuttal has the effect of refreshing Google's search indexing, increasing content and visits for the site and reports, and generally raising the search ranking of the negative report. Moreover, the true facts are that the text of the rebuttal does not appear in Google search results with the same prominence or in an intelligible context comparable to the bad reports or as compared to the paid text for CAP investigations. For example, one victim had reports as number one, paid approximately $600 to an SEO consultant, also followed defendants' advice to file rebuttals. The SEO consultant had lowered the ranking of the report from 1 to 4, but when she filed a rebuttal, the report went back to 1, thereby undoing the small success the consultant had achieved. Another had a similar experience paying $3,500 upfront and $300 a month to maintain her own website and blogs. Plaintiffs and others filed such rebuttals and aggravated their injuries, including incurring costs for IT consultants, and in the case of those actively working with SEO consultants, undoing the thousands of dollars paid to such consultants in accordance with Bridge. 4. There is a scheme to defraud, through the wires, on the "Want to sue Ripoff Report?" page of Defendants' website through which Defendants falsely represent to the public that "Ripoff Report has never, ever (not now, and not in the past) done anything to cause Google to rank our website higher in search results than other sites." The true facts are that RoR has done many things to support itself as a business model and that cause Google to rank higher by circumventing punitive changes in algorithms that would otherwise ensue. Ror gives Google discriminatory, sweetheart treatment in reports to maintain their high organic Google search authority and favorable ranking. Bing and Yahoo have discredited and penalized Ror in their search algorithms, but Ror has actively sought, written and published titles, disclaimers and comments and changed the meaning of reports in substantial ways to maintain favor with Google. These include writing a disclaimer that "this is not google.com the search company" on a report about Google Adsense, changing the name of Sergey Brin, a Google founder, and editorializing about reports on Brin and Larry Evans. The search community openly speculates about what the relationship is between RoR and Google, and RoR has a vested financial interest in clicks, ads and site traffic in not having Google change its search algorithm to give RoR less authority. The public relies on the false statement as true, and gives greater credence to reports believing RoR to be a legitimate site if it ranks so highly with a common search engine like Google. Its placement on the "Want to Sue Us" page in particular takes advantage of members of the public looking for recourse but that are unsophisticated in search technology or law, further discouraging them from asserting their rights. Plaintiffs and other were proximately damaged by the false statements in money paid to IT consultants, loss of contacts and business opportunities in which they have a recognized property right, and directly delayed bringing suit by intimidation, according to the standards of Bridge.

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Page 3 of 4 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 256 of 439

5. There is a scheme to defraud in the "Want to Sue RoR?" section through which Defendants falsely represent themselves as authorities in Internet and technology law with special knowledge and giving advice on which the public is likely to rely in taking or forbearing from legal action that is contray to their interest and serves Ror's business interests. The false statements include that defendants are "immune," have "never lost a case," and numerous contentions of law presented as fact. The true facts are that the contentions are either false, opinion wrongly presented as fact or partial truths that amount to lies. Ror has lost or settled cases and defaulted on cases, which is considered tantamount to an unfavorable resolution. Courts have held that immunity does not apply to claims, such as RICO, that do not attempt to hold an ISP as the speaker of the content at issue. The context and relative sophistication of the parties, and efforts to gain the trust of the public, amount to misstatements of fact creating an exception to the general principal that legal advice cannot form the basis of fraud. Compare, e.g. Miller v. Yokohama, 358 F.3d 616, 621 (9th Cir. 2004) (discussing Seeger v. Odell, 18 Cal. 2d 409, 115 P.2d 977, 979 (Cal. 1941) and Regus v. Schartkoff, 156 Cal. App. 2d 382, 319 P. 2d 721, 724 (1957)). Moreover, under the law of attorney advice, these statements create an online attorney-client relationship under the applicable standard (it is advice that a person could reasonably be expect to rely on) aggravated with an undisclosed conflict of interest with Ror's attorneys. It is transmitted through the wires to many states that have stringent disclosure and waiver of conflict guidelines. California is one that requires a written waiver of conflict. There is no conspicuous disclaimer in this section of the site such as "we are not your lawyers; you should consult your own lawyer." See Catherine J. Lanctot, "Attorney-Client Relationships in Cyberspace: The Peril and the Promise - Forming an Attorney-Client Relationship by Giving Legal Advice," 49 Duke L. J. 147 (1999). The public relies on these false statements, sitting on their rights, and are intimidated from investigating and asserting their rights. Moreover, the public takes these statements as establishing the credibility overall of the site and content. Plaintiffs were proximately injured, both by the public's perception and in the form of fees paid to IT consultants, waste of time and lost contracts bythe standards of Bridge. 6. There is a scheme to defraud, over the wires, through false statements to the effect that unlike Better Business Bureau, Ror does not filter or suppress reports. The true facts are that RoR does not post negative reports about certain businesses, such as CAP, itself, and its agents. Severl awitness tried and failed to post negative reports about certain businesses. The public relies on these false statements, giving more credence to the negative reports. Plaintiffs were proximately injured by fees paid to IT contractors, loss of business and contracts, traceaale to the public's reliance, in accordance with Bridge. 7. There is a scheme to defraud, through the wires, through the false statements in CAP investigation results that the business is safe, reliable or otherwise can be trusted. The true facts are that anyone can pay to have this commentary featured on their reports under CAP.

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Page 4 of 4 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 257 of 439

The public relies on these statements, believes them to be true and infers that non-CAP members are not as committed to excellent customer service as CAP members. Plaintiffs were proximately injured by fees paid to IT contractors, loss of business and contracts, traceable to the public's reliance, in accordance with Bridge.

*

*

*

None of this is binding as a waiver, estoppel or admission, and is being furnished in good faith solely to give you a head start on settlement discussions and case management. This is not a pleading, and therefore the proscriptions of Rule 11 do not apply. However, we consider it to be pursuant to Court instruction and therefore within the litigation and pre-litigation privileges of California Civil Code Section 47(b); Rubin v. Green, 4 Cal.4th 1187, 1193-94 (1993), Restatement (Second) of Torts § 586 (1977) and otherwise. Although this is not a pleading, to the extent the foregoing summary puts your clients on notice of business practices and incentivizes them to voluntarily amend them, we reserve the right to claim that this was presented as part of a reasonable settlement effort to correct those practices without the need for litigation and that such changes are in the public benefit for purposes of California Code Civil Procedure Section 1025.1; Vasquez v. State of California, 195 P.3d 1049, 1053, 45 Cal. 4th 243, 253 (Cal. 2008); Graham v. DaimlerChrysler, 101 P.3d 140, 156, 34 Cal. 4th 553, 578 (Cal. 2004), and whether or not under a "catalyst," or "changed legal relationship" theory or otherwise. Please know in advance that we are under no obligation to respond to any feedback in writing or otherwise, particularly as a purported prerequisite to pre-filing conferences or taking any other action. In addition, as you are opposing counsel, we are not required to rely on your interpretations of the law or representations of fact and we reserve the right to conduct additional research and seek discovery in our investigation of the case. However, your comments on the law, potential settlement or otherwise are always welcome. Lisa and Daniel -Lisa J. Borodkin lisa@lisaborodkin.com 323-337-7933
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Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 258 of 439

Exhibit L

Case Case 2:11-cv-01426-GMS Document 166-1 Filed 08/06/10 Page 1 of 26 439 ID 2:10-cv-01360-SVW -PJW Document 110 Filed 12/10/12 Page 259 of Page #:3343

1 2 3 4 5 6 7 8 9 10 11 12 13 14
JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

Maria Crimi Speth, (Admitted Pro Hac Vice) mcs@jaburgwilk.com JABURG & WILK, P.C. 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 (602) 248-1000 David S. Gingras, CSB #218793 David.Gingras@webmail.azbar.org Gingras Law Office, PLLC 4072 E Mountain Vista Dr. Phoenix, AZ 85048 Tel.: (480) 668-3623 Fax: (480) 248-3196 David.Gingras@webmail.azbar.org Attorneys for Defendants Xcentric Ventures, LLC and Edward Magedson

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ASIA ECONOMIC INSTITUTE, LLC, et al., Plaintiffs, v. XCENTRIC VENTURES, LLC, et al., Defendants. Hearing Date: September 20, 2010 Time: 1:30 p.m. Courtroom: 6 Case No: 2:10-cv-01360-RSWL-PJW MOTION TO DISMISS FIRST AMENDED COMPLAINT PURSUANT TO FED.R.CIV.P. 12(b)(6) AND FED.R.CIV.P. 9(b)

15 16 17 18 19 20 21 22 23 24 25 26 27 28

MOTION TO DISMISS
10297-70/MCS/DAG/819821_v1

2:10-cv-01360-SVW-PJW

Case Case 2:11-cv-01426-GMS Document 166-1 Filed 08/06/10 Page 2 of 26 439 ID 2:10-cv-01360-SVW -PJW Document 110 Filed 12/10/12 Page 260 of Page #:3344

1 2 3 4 5 6 7 8 9 10 11 12 13 14
JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

TABLE OF CONTENTS I. II. INTRODUCTION PRELIMINARY STATEMENT A. B. III. The Elements of a RICO Claim Predicated On Wire Fraud Summary of New/Repled Fraud Claims in FAC 1 1 2 3 6

ARGUMENT A. The FAC Fails to Adequately Allege Causation In Support Of Plaintiffs’ RICO (Wire Fraud) And State-Law Fraud Claims. 1. The Statement That “Reports Never Come Down” Did Not Actually or Proximately Cause Any Alleged Harm The Statement That the Subject of A Report Can File a Free Rebuttal and That Rebuttals Can Be Effective Did Not Actually Or Proximately Cause Any Alleged Harm The Statement That Defendants Have Never Done Anything to Cause Google to Rank Their Website Higher in Search Results Did Not Actually Or Proximately Cause Any Alleged Harm That Defendants Present Themselves as Authorities in Internet and Technology Law Did Not Actually Or Proximately Cause Any Alleged Harm The Statement That Defendants Do Not Filter or Suppress Results Did Not Actually Or Proximately Cause Any Alleged Harm That Defendants Present CAP members as Safe, Reliable, and Trustworthy Did Not Actually Or Proximately Cause Any Alleged Harm

6

8

2.

15 16 17 18 19 20 21 22 23 24 25 26 27 28 MOTION TO DISMISS C. B. 6. 5. 4. 3.

9

10

10

11

11 11 14

Fraud Cannot Be Based on Statements About Future Events Fraud Cannot Be Based On A Statement Of Discretionary Policy

2:10-cv-01360-SVW-PJW i

10297-70/MCS/DAG/819821_v1

Case Case 2:11-cv-01426-GMS Document 166-1 Filed 08/06/10 Page 3 of 26 439 ID 2:10-cv-01360-SVW -PJW Document 110 Filed 12/10/12 Page 261 of Page #:3345

1 2 3 4 5 6 7 8 9 10 11 12 13 14
JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

D.

The Fraud Claim as Related to the Legal Opinions Fails Under Fed.R.Civ.P. 9(b) and 12(b)(6) 16 Fraud Cannot Be Based On Opinions About the Effectiveness of Rebuttals And About CAP Members The FAC Fails to Allege A Plausible Claim for RICO Conspiracy

E. F. IV.

18 20 20

CONCLUSION

15 16 17 18 19 20 21 22 23 24 25 26 27 28 MOTION TO DISMISS ii
10297-70/MCS/DAG/819821_v1

2:10-cv-01360-SVW-PJW

Case Case 2:11-cv-01426-GMS Document 166-1 Filed 08/06/10 Page 4 of 26 439 ID 2:10-cv-01360-SVW -PJW Document 110 Filed 12/10/12 Page 262 of Page #:3346

1 2 3 4 5 6 7 8 9 10 11 12 13 14
JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

TABLE OF AUTHORITIES Amfac Mtg. Corp. v. Arizona Mall of Tempe, 583 F.2d 426 (9th Cir. 1978) ........................ 1 Anderson v. Clow (In re Stac Electronics Securities Litig.), 89 F.3d 1399 (9th Cir. 1996)................................................................................................................................ 14 Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 126 S. Ct. 1991, 164 L. Ed. 2d 720 (2006) ............................................................................................................................... 7 Ashcroft v. Iqbal, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)................................................. 1 Barnes v. Yahoo!, Inc., 570 F.3d 1096 n.1 (9th Cir. 2009) ................................................. 14 Bayview Hunters Point Comm. Advocates v. Metropolitan Transp. Com’n, 366 F.3d 692 (9th Cir. 2004) .................................................................................................. 12 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) .................................................................................................................... 1, 2 Bly-Magee v. California, 236 F.3d 1014 (9th Cir. 2001).................................................... 17 Bulgo v. Munoz, 853 F.2d 710 (9th Cir. 1988).................................................................... 19 California Pharmacy Mgmt., LLC v. Zenith Ins. Co., 669 F.Supp.2d 1152 (C.D.Cal. 2009)............................................................................................................................... 18 Caroselli v. First Interstate Bank of Denver, 1993 WL 524315 (9th Cir. 1993)............... 18 Cedars Sinai Medical Center v. Mid-West Nat. Life Ins. Co., 118 F.Supp.2d 1002 (C.D.Cal. 2000) .............................................................................................................. 11 Christiansen v. Roddy, 186 Cal.App.3d 780, 231 Cal.Rptr. 72 (1986).............................. 20 Continental Airlines, Inc. v. McDonnell Douglas Corp., 216 Cal.App.3d 388, 264 Cal.Rptr. 779 (1989)....................................................................................................... 11 Durning v. First Boston Corp., 815 F.2d 1265 (9th Cir. 1987) ...................................... 2, 18 Falcone v. DLA Piper U.S. LLP Profit Sharing and 401(k) Sav. Plan Comm., 2010 WL 2280543 (N.D.Cal. 2010).......................................................................................... 1 Gagne v. Bertran, 43 Cal.2d 481, 487-88, 275 P.2d 15 (1954) ......................................... 11 Gentry v. eBay, Inc., 99 Cal.App.4th 816, 121 Cal.Rptr.2d 703 (4th Dist. 2002) ......... 15, 19 Global Royalties, Ltd. v. Xcentric Ventures, LLC, 544 F.Supp.2d 929 (D.Ariz. 2008)................................................................................................................................. 9 Hemi Group, LLC v. City of New York, N.Y., 130 S. Ct. 983, 989 (2010)........................... 7 Holmes v. Securities Investor Protection Corporation, 503 U.S. 258, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) ......................................................................................... 7 In re Jogert, Inc., 950 F.2d 1498, 1507 (9th Cir. 1991)...................................................... 12 Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009)................................................. 17 Living Designs, Inc. v. E. I. Dupont de Numours and Co., 431 F.3d 353 (9th Cir.2005) cert. denied, 126 S. Ct. 2861 (2006) ................................................................ 2 Martens v. Minn. Mining & Mfg. Co., 616 N.W.2d 732 (Minn. 2000).............................. 15 Miller v. Yokohama Tire Corp., 358 F.3d 616 (9th Cir. 2004) ..................................... 17, 18 Movsesian v. Victoria Versicherung AG, 578 F.3d 1052 (9th Cir. 2009)............................. 1 Neben v. Thrivent Financial for Lutherans, 2004 WL 251838, *6 (D.Minn. 2004) ......... 15 Neder v. United States, 527 U.S. 1 (1999) ........................................................................... 3 Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells, 86 Cal. App. 4th 303, 103 Cal. Rptr. 2d 159 (4th Dist. 2000)..................................................................................... 15, 19 Poulos v. Caesar’s World, Inc., 379 F.3d 654 (9th Cir. 2005) ............................................. 6 Richard P. v. Vista Del Mar Child Care Serv., 165 Cal.Rptr. 370, (Cal.Ct.App. 1980)............................................................................................................................... 12 Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275 (1985) ................. 2 Sosa v. DIRECTV, Inc., 437 F.3d 923, 941 (9th Cir. 2006)....................................... 6, 8, 17 Spinedex Physical Therapy USA, Inc. v. United Health Care of Arizona, Inc., 661 F. Supp.3d 1076 (D.Ariz. 2009)....................................................................................... 2 Twombly, 550 U.S .............................................................................................................. 20 United States v. Ciccone, 219 F.3d 1078 (9th Cir. 2000) .................................................... 3 MOTION TO DISMISS 2:10-cv-01360-SVW-PJW iii
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Cases

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United States v. Stapleton, 293 F.3d 1111 (9th Cir. 2002).................................................... 3 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003).......................................... 17
Statutes

(Cal. Civ. Code §§ 1572, 1710).......................................................................................... 11 U.S.C. § 1962(c)......................................................................................................... 2, 7, 20
Rules

Fed. R. Civ. P. 12(b)..................................................................................... 1, 2, 6, 8, 14, 18 Fed. R. Civ. P. 9(b)..................................................................................................... 1, 3, 17

15 16 17 18 19 20 21 22 23 24 25 26 27 28 MOTION TO DISMISS iv
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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiffs’ First Amended Complaint (Doc. #96; “FAC”) does not assert any cause of action upon which relief may be granted. Rather, this document is a rhetorical political manifesto designed to delight critics of Ripoff Report while falsely smearing Defendants in retaliation for their efforts to defend the First Amendment.1 Plaintiffs’ new fraud-

based allegations should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) and/or Fed. R. Civ. P. 9(b). II. PRELIMINARY STATEMENT Defendants recognize that under Rule 12(b)(6), all well-pleaded factual allegations are to be construed in the light most favorable to the pleader, and accepted as true. Movsesian v. Victoria Versicherung AG, 578 F.3d 1052, 1056 (9th Cir. 2009). However, courts faced with a 12(b)(6) motion “are not bound to accept as true a legal conclusion couched as a factual allegation,” and as such, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although a court normally cannot consider matters outside the pleadings in deciding a motion under Rule 12(b)(6), the court can consider materials attached to the complaint as exhibits. See Falcone v. DLA Piper U.S. LLP Profit Sharing and 401(k) Sav. Plan Comm., 2010 WL 2280543 (N.D.Cal. 2010) (citing Amfac Mtg. Corp. v. Arizona Mall of Tempe, 583 F.2d 426, 429–30 (9th Cir. 1978) (in context of a motion under Rule 12(b)(6), “The court is not limited by the mere allegations contained in the complaint,” and may properly consider any documents attached to the complaint as exhibits).

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Plaintiffs are wrongfully misusing the process of this court to publicly lobby for the eradication of the Ripoff Report website by presenting false and misleading statements of fact and law. This conduct is sanctionable and should not be tolerated by this court. This is particularly true where, as here, Plaintiffs have repeatedly engaged in a pattern of such conduct. Defendants have served a Rule 11 Motion on Plaintiffs and will file that Motion if the complaint is not withdrawn or amended.

1

MOTION TO DISMISS
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When a complaint contains exhibits or references documents, a court “need not accept as true allegations contradicting documents that are referenced in the complaint … .” Spinedex Physical Therapy USA, Inc. v. United Health Care of Arizona, Inc., 661 F. Supp.3d 1076, 1083 (D.Ariz. 2009). In fact, a “court may disregard allegations in the complaint if contradicted by facts established by exhibits attached to the complaint.” Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987) (emphasis added). These points carry special importance here because many of the key factual allegations in the FAC are not only false, they are contradicted by the documents referenced in, and attached to, the FAC. In light of the Supreme Court’s clarification of Rule 8’s pleading standards set forth in Twombly, plaintiffs hoping to avoid dismissal under Rule 12(b)(6) must do more than offer “an unadorned, the defendant unlawfullyharmed-me accusation.” Twombly, 550 U.S. at 555. Specifically, plaintiffs must show

they have “nudged their claims across the line from conceivable to plausible … .” Twombly, 550 U.S. at 570. As explained herein, Plaintiffs have not satisfied this burden because their RICO and fraud claims are so clearly lacking the mandatory elements of damages and causation that those claims are not remotely plausible and are therefore appropriate for dismissal under Rule 12(b)(6). A. The Elements of a RICO Claim Predicated on Wire Fraud

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The elements that a plaintiff must prove (and therefore plead) to recover under 18 U.S.C. § 1962(c) are: (1) conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity (known as “predicate acts”); (5) causing injury to plaintiff’s “business or property” See Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) cert. denied, 126 S. Ct. 2861 (2006); Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275 (1985). Plaintiffs allege that the predicate acts are wire fraud. Plaintiffs must plead, with particularity, each of the following elements: Xcentric (1) participated in a scheme to defraud; and (2) used the wires to further the scheme. Ninth Circuit Model Criminal Jury MOTION TO DISMISS 2
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Instructions, 8.103 (wire fraud); United States v. Ciccone, 219 F.3d 1078, 1083 (9th Cir. 2000). In addition, there is an element of specific intent. Id. Materiality is an essential element of the crime of wire fraud. Neder v. United States, 527 U.S. 1 (1999). Plaintiffs have not sufficiently pled wire fraud as a predicate act because they have not pled facts that constitute a scheme to defraud, and they have not pled facts that constitute causation between their alleged injury and the alleged predicate act. Additionally, it is impossible to infer materiality or intent based on the plain reading of the complaint and its attachments. In United States v. Stapleton, 293 F.3d 1111 (9th Cir. 2002) the Court affirmed and held that the following jury instructions were appropriate: In order for the defendant to be found guilty of wire fraud, the government must prove each of the following elements beyond a reasonable doubt. First, the defendant made up or participated in a scheme or plan for obtaining money or property by making false promises or statements with all of you agreeing on at least one particular false promise or statement that was made. Second element is that the defendant knew that the promises or statements were false. The third element is that the promises or statements were of a kind that would reasonably influence a person to part with money or property. The fourth element is that the defendant acted with the intent to defraud. And the fifth element is that the defendant used or caused to be used wire or radio or television communication in interstate or foreign commerce to carry out or attempt to carry out an essential part of the scheme. B. Summary Of New/Repled Fraud Claims In FAC

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Following the Rule 9(b) dismissal of the wire fraud claim for failure to plead fraud with particularity, the FAC contains voluminous allegations which attempt to demonstrate the presence of a RICO/wire fraud claim, but which fall far short of doing so. Despite dozens of bizarre insults such as: “The Ripoff Report enterprise takes advantage of the MOTION TO DISMISS 3
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average person’s lack of sophistication in technology, reliance on Internet search engines, and general lack of time[]”, FAC ¶ 16, the true factual basis of Plaintiffs’ wire fraud remains elusive. This is so because the Complaint includes a baffling array of criticisms of seemingly every aspect of the Ripoff Report website, no matter how irrelevant or obscure. For instance, FAC ¶¶ 56–58 accuses Defendants of deliberately designing the Ripoff Report website in such a way that certain pages are hard to print. Of course, given Plaintiffs’ demonstrated ability to print pages from Defendants’ site, it is unclear why or how this “anti-printing scheme” is evidence of wire fraud. Culling through the hundreds of abstruse, inflammatory and irrelevant allegations, the core of the wire fraud claim (and two newly added state-law fraud claims) appear to be based on six primary representations that Plaintiffs claim are false, material, and resulted in harm to them: 1) 2) Defendants represent that “reports never come down”; FAC ¶¶ 196–204 Defendants state that victims can file a free rebuttal and that rebuttals are

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effective and helpful; FAC ¶¶ 227–229 3) Defendants state that they have never done anything to cause Google to rank

their website higher in search results; FAC ¶¶ 247–248 4) Defendants present themselves as authorities in Internet and Technology

Law, etc.; FAC ¶¶ 254–256 5) Defendants state that they do not filter or suppress results, unlike the Better

Business Bureau; FAC ¶¶ 261–264 6) 266–272 Based on these representations, Plaintiffs claim they were harmed in four different ways. First, they claim: “If Plaintiffs had known the true facts they would have sued ROR Defendants present CAP members as safe, reliable, and trustworthy; FAC ¶¶

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earlier and not delayed in trying to resolve this issue by any means other than a lawsuit ….” FAC ¶ 260 (emphasis added). Next, Plaintiffs allege a second type of generalized harm which is as follows: The false statements lead those victimized to believe they have very limited courses of action [for dealing with reports]. If they wish to mitigate the damage caused by these reports, they must either pay Defendants to be in the CAP or pay an information technology (“IT”) consultant to publish alternative online content to repair their reputations via search engines. FAC ¶ 212. As to this allegation, Plaintiffs claim that instead of paying anything to Defendants, they tried some alternative solutions which included paying $25 for a “listing on Craigslist seeking an on site web product developer with SEO skills in order to combat the defamatory reports.” FAC ¶ 213. Plaintiffs further claim to have paid $2,390 to various third-party IT/SEO consultants who promised to help hide reports about Plaintiffs in Google’s search results but who apparently failed to deliver those results. See FAC ¶¶ 214–217. Plaintiffs do not, however, allege that Defendants ever recommended either of these methods for dealing with reports or that Defendants knew or intended that the thirdparty SEO consultants hired by Plaintiffs would fail to deliver whatever results they may have promised. Third, Plaintiffs claim that on the advice of Mr. Magedson in which he suggested that “the best thing you can do is to post a rebuttal,” Mr. Mobrez filed a rebuttal to one or more reports on April 3, 2009. See FAC ¶¶ 244–45. Fourth and finally, Plaintiffs provide a generic laundry list of alleged damages including, but not limited to: “Amounts expended in traveling to Washington, DC and advocating to representatives and lawmakers for a change in the statute in the amount of $2,500 to date.” FAC ¶ 288(a). Plaintiffs also allege other damages including $347,983 in “Rented office space,” “Phone and Internet Communications to date: $34,809,” and so forth. FAC ¶ 288. However, Plaintiffs do not allege or explain how these losses were actually and proximately caused by any of Defendants’ alleged misrepresentations MOTION TO DISMISS 5
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separate and apart from the negative reports about Plaintiffs posted by third party users of the Ripoff Report website. As explained herein, the purported misrepresentations are non-actionable expressions of opinion or law which are per se insufficient to state a claim for wire fraud or any other type of fraud. However, even assuming Plaintiffs’ allegations are true, they are patently insufficient to state a viable claim for RICO/wire fraud because the Complaint does not allege a plausible causal nexus between the alleged wrongful conduct and the harm Plaintiffs claim to have suffered. III. ARGUMENT A. The FAC Fails To Adequately Allege Causation In Support Of Plaintiffs’ RICO (Wire Fraud) And State-Law Fraud Claims

Causation is the Achilles heel of any RICO claim. RICO claims are extremely complicated and can fail for many reasons. However, the most frequent basis for a 12(b)(6) dismissal of a RICO claim is lack of either actual or proximate cause. These common defects are present here and are fatal to Plaintiffs’ Amended Complaint both as to their RICO claim and their state-law fraud claims. The FAC fails to show that any false statements made by Defendants were both a “but for” and proximate cause of Plaintiffs’ alleged harm. Insofar as Defendants

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understand Plaintiffs’ theory, it appears they allege that Defendants made six different false statements on their website as quoted above. As a matter of law, these allegations cannot support a RICO claim because the allegations are insufficient to show a plausible causal connection between any false statements of fact and the specific harm allegedly suffered by Plaintiffs. “It is well settled that, to maintain a civil RICO claim predicated on mail [or wire] fraud, a plaintiff must show that the defendants’ alleged misconduct proximately caused the injury.” Sosa v. DIRECTV, Inc., 437 F.3d 923, 941 (9th Cir. 2006) (brackets in original) (quoting Poulos v. Caesar’s World, Inc., 379 F.3d 654, 664 (9th Cir. 2005)). Furthermore, as the U.S. Supreme Court has explained:

MOTION TO DISMISS 6
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[T]o state a claim under civil RICO, the plaintiff is required to show that a RICO predicate offense “not only was a ‘but for’ cause of his injury, but was the proximate cause as well.” Proximate cause for RICO purposes, we made clear, should be evaluated in light of its common-law foundations; proximate cause thus requires “some direct relation between the injury asserted and the injurious conduct alleged.” A link that is “too remote,” “purely contingent,” or “indirec[t]” is insufficient. Hemi Group, LLC v. City of New York, N.Y., 130 S. Ct. 983, 989 (2010) (emphasis added) (quoting Holmes v. Securities Investor Protection Corporation, 503 U.S. 258, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). In Holmes, the Supreme Court held that a plaintiff may sue under § 1962(c) only if the alleged RICO violation was the proximate cause of the plaintiff’s injury. In Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 457, 126 S. Ct. 1991, 1996, 164 L. Ed. 2d 720 (2006), that theory was extended to claims, such as the one here, based on § 1962(c). As the Court in Anza explained, the types of injuries asserted by Plaintiffs constitute a serious discontinuity between the actions alleged giving rise to the RICO claim, and the actual damages being asserted. See Anza, 547 U.S. at 459, 126 S.Ct. at 1997 (explaining that because “Businesses lose and gain customers for many reasons,” plaintiff’s “alleged injury was not the direct result of a RICO violation”). The theory behind this requirement is simple: The requirement of a direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims. See Holmes, 503 U.S. at 269-270, 112 S.Ct. 1311 (“[D]irectly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely”) Id. at 460, 126 S.Ct. at 1998. Proximate causation requires “some direct relation between the injury asserted and the injurious conduct alleged.” Holmes, 503 U.S. at 268, 112 S.Ct. 1311. Under Anza, courts must scrutinize the causal link between the RICO violation and the injury, identifying with precision both the nature of the violation and the cause of the injury to the plaintiff. Anza, 547 U.S. at 1996-98. “Where the violation is not itself the immediate cause of the plaintiff’s injury, proximate cause may be lacking.” Canyon MOTION TO DISMISS 7
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County v. Syngenta Seeds, Inc., 519 F.3d 969, 981 (9th Cir. 2008) cert. denied, 129 S. Ct. 458, 172 L. Ed. 2d 327 (2008). Plaintiffs cannot, and have not, alleged appropriate injury necessary to sustain their RICO claim. Applying RICO’s strict causation requirements to the alleged fraudulent representations set forth in the FAC demonstrates that Plaintiffs’ RICO claim should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6). This result is appropriate for the same reason discussed by the Ninth Circuit in Sosa v. DirectTV in which the court found a lack of proximate cause as to Plaintiffs’ allegation “that DIRECTV’s threat to sue ‘within 14 days’ was false and constituted mail fraud.” Sosa, 437 F.3d at 941. Even assuming this statement was factually false, the Ninth Circuit concluded that RICO’s proximate cause requirement had not been met because “Sosa utterly fails to show how DIRECTV’s false threat to sue within 14 days proximately caused him any injury.” Id. 1. The Statement That “Reports Never Come Down” Did Not Actually Or Proximately Cause Any Alleged Harm

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Here, Plaintiffs allege, in a conclusory fashion, that they were harmed by Defendants’ false statement that “reports are never removed”.2 The actual facts alleged, however, cannot support a wire fraud or state-law fraud claim because both “but for” and proximate causation are clearly lacking. Plaintiffs never allege what damages they

incurred that they would not have incurred if Defendants had instead stated, “we sometimes remove reports” (which is the statement that the FAC alleges is true). Not one category of the damages that Plaintiffs claim to have incurred could possibly be causally connected to Defendants stating that reports are never removed instead of stating that reports are sometimes removed. This is because even if Defendants had announced that reports are sometimes removed, there is no allegation that Defendants were ever willing to remove the reports about Plaintiffs. If Plaintiffs were harmed, it was solely because a third party former employee of Plaintiffs authored content posted on Ripoff Report and

Later this Motion will address why the allegation that statement is false is contradicted by the very exhibits that Plaintiffs attach to their FAC.

2

MOTION TO DISMISS 8
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Defendants refused to remove the content. Of course, Defendants always have a lawful right and editorial discretion to refuse to remove reports. See generally Global Royalties, Ltd. v. Xcentric Ventures, LLC, 544 F. Supp.2d 929 (D. Ariz. 2008). Under these facts, Plaintiffs cannot establish a plausible link between any damage they incurred and any false statements made to them about Defendants’ report removal policy. See Canyon County, 519 F.3d at 982 n. 12 (“It is therefore evident that courts need not allow RICO plaintiffs leeway to continue on with their case in an attempt to prove an entirely remote causal link.”) 2. The Statement That The Subject of A Report Can File a Free Rebuttal and That Rebuttals Can Be Effective Did Not Actually Or Proximately Cause Any Alleged Harm

Plaintiffs claim that Defendants made a series of statements about filing rebuttals, to the effect that “we offer you the opportunity to file a rebuttal,” “you can write a rebuttal explaining your position,” “rebuttals are free,” and “we strongly encourage you to use this resource since they can be extremely effective.” FAC ¶228, 229. Plaintiffs claim that these statements are false. Plaintiffs also allege in ¶244 that Plaintiffs did file a rebuttal. Putting aside the Rule 11 implications of alleging both that the statement that you can file a rebuttal is false and that Plaintiffs in fact filed a rebuttal, Plaintiffs once again have failed to plead facts that demonstrate causation. Since Plaintiffs did file a rebuttal, they

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could not be harmed by allegedly false statements that rebuttals can be filed. Plaintiffs also state that after they filed a rebuttal, one of the reports about AEI was moved from the third page of Google’s search results to the first page, see FAC ¶ 246, but they do not allege that filing the rebuttal actually caused this to occur, nor do they allege that Defendants knew this would occur. In addition, Plaintiffs do not allege that any harm occurred as a result of this change in ranking; i.e., conceding that the report about AEI was already found on page three of Google before Mr. Mobrez posted his rebuttal. Plaintiffs do not allege that this change in ranking resulted in any additional harm to

MOTION TO DISMISS 9
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Plaintiffs beyond whatever harm would have occurred if the report remained on page three. 3. The Statement That Defendants Have Never Done Anything to Cause Google to Rank Their Website Higher in Search Results Did Not Actually Or Proximately Cause Any Alleged Harm

Here again, assuming that Defendants actually engage in search engine optimization, but claim they do not, the claim fails for lack of causation between that allegedly false statement and any harm. Plaintiffs allege that Ripoff Report ranks high in the Google searches. Whether or not that ranking is the result of something that Ripoff Report did is entirely immaterial to Plaintiffs’ purported damages. Plaintiff also alleges that they were damaged in money paid to IT consultants, loss of contacts and business opportunities. ¶253. Nothing in the FAC, however, explains how Plaintiffs’ position would have been different if Ripoff Report had announced that it shows favor to Google in reports, which causes Google to show favor to Ripoff Report in search rankings (Ripoff Report denies this). 4. That Defendants Present Themselves as Authorities in Internet and Technology Law Did Not Actually Or Proximately Cause Any Alleged Harm

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Plaintiffs allege that the claims on the Ripoff Report website about its past litigation experiences are false. FAC ¶254-256. Plaintiffs then allege that they were injured “both by the public’s perception and in the form of fees paid to IT consultants, loss of business over time and lost contract.” FAC ¶259. Plaintiffs further allege that if they had known the true facts, they would have sued Ripoff Report earlier and not delayed in trying to resolve this issue by any means other than a lawsuit. FAC ¶260. Plaintiffs do not, however, allege how suing earlier would have benefited them in any tangible way. In other words, Plaintiffs do not point to any harm caused by the short delay in commencing litigation.

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5.

The Statement That Defendants Do Not Filter or Suppress Results Did Not Actually Or Proximately Cause Any Alleged Harm

Plaintiffs claim that Ripoff Report claims that it does not hide reports of satisfied complaints and that all complaints remain public. FAC ¶261. Plaintiffs claim this is false because Ripoff Report does not post negative reports about certain businesses, such as CAP members. FAC ¶263. Plaintiffs claim that they were injured by fees paid to IT

contractors and loss of business contracts and that if they had known the true facts they would have sued Ripoff Report earlier. FAC ¶265. Once again, Plaintiffs make no factual allegation that causally connects Ripoff Report’s statements about not hiding reports of satisfied complaints to Plaintiffs hiring IT contractors or delaying this lawsuit. 6. That Defendants Present CAP members as Safe, Reliable, and Trustworthy Did Not Actually Or Proximately Cause Any Alleged Harm

Plaintiffs allege that Defendants’ statements of investigation of CAP members are false. FAC ¶267, 268. Plaintiffs then claim that they were injured by fees paid to IT contractors and loss of business contracts. FAC ¶271. Plaintiffs plead no causal

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connection between the allegedly false statement and any damage they incurred. Plaintiffs do not and cannot claim that they did business with a CAP member and were harmed by a CAP member who Ripoff Report did not properly investigate. B. Fraud Cannot Be Based On Statements About Future Events

Whether based on California state law (Cal. Civ. Code §§ 1572, 1710), commonlaw, or federal law, a fraud claim generally requires proof that the Defendant made a false representation “as to a past or existing material fact.” See Cedars Sinai Medical Center v. Mid-West Nat. Life Ins. Co., 118 F. Supp.2d 1002, 1010 (C.D.Cal. 2000) (emphasis added) (citing Gagne v. Bertran, 43 Cal.2d 481, 487-88, 275 P.2d 15 (1954); Continental Airlines, Inc. v. McDonnell Douglas Corp., 216 Cal.App.3d 388, 402, 264 Cal.Rptr. 779 (1989). Because human beings are not psychic and cannot predict the future, fraud

cannot be based on false statements concerning future events; “‘predictions as to future events are ordinarily non-actionable expressions of opinion’ under basic principles of the MOTION TO DISMISS 2:10-cv-01360-SVW-PJW 11
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tort of fraudulent misrepresentation.”

Bayview Hunters Point Comm. Advocates v.

Metropolitan Transp. Com’n, 366 F.3d 692, 698 (9th Cir. 2004) (quoting In re Jogert, Inc., 950 F.2d 1498, 1507 (9th Cir. 1991)); Richard P. v. Vista Del Mar Child Care Serv., 165 Cal.Rptr. 370, 372 (Cal.Ct.App. 1980). The purportedly false statement that Ripoff Report does not remove reports, was not fraud because, among other reasons, it is a true statement of Ripoff Report’s policy. Specifically, beginning with ¶ 205, the FAC alleges that “the true facts are that Reports do, in fact, come down … ” implying that Mr. Magedson lied to Mr. Mobrez in May and July 2009 when he informed him “We do not remove reports.” The FAC purports to offer proof that reports “do come down” based on a settlement agreement dated May 15, 2009 attached as Exhibit 8 to the FAC in a case styled Xcentric Ventures, LLC v. QED Media Group, LLC. By its own terms, nothing in the settlement agreement requires or provides for the removal of any reports from the Ripoff Report site. Rather, ¶ 2(e) of the settlement agreement states that for a period of 2 years, Xcentric will agree to monitor incoming reports about QED and “attempt to verify whether the author is or was an actual customer of QED.” In the event an author was unable to prove that they were an actual customer of QED, ¶ 2(e) of the settlement agreement provides that the report would not be posted. According to a declaration from the lawyer for QED, Kenton Hutcherson, attached as Exhibit 12 to the FAC, in October 2009, a report about QED was subsequently posted without the pre-posting verification required by ¶ 2(e) of the settlement agreement. Based on the requirements of the settlement agreement, on October 29, 2009 Xcentric’s counsel informed Mr. Hutcherson that the report at issue was removed. The FAC also alleges that David Gingras responded “YES” on January 15, 2010 to a request to remove a report. ¶206. This allegation is directly contradicted by the actual email which is Exhibit 11 to the FAC which reveals that Mr. Gingras actually stated that

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they said “yes” to helping a 16 year-old girl during the Christmas season. The email does not say that they said “yes” to removing a report. Far from demonstrating that Mr. Mobrez was a victim of fraud, these events involving the removal of a report in October 2009 show that Mr. Magedson’s statements concerning the non-removal of reports were true at the time they were to Mr. Mobrez in May and July 2009 because at that time, the report about QED media had not been removed. A timeline of Plaintiffs’ allegations is helpful to better illustrate this point: • • • • • June/October 2009 — Ripoff Report website contains statement saying: “We do not remove any Rip-off Reports.” FAC ¶ 171 May/July 2009 — Magedson sends response email to Mobrez stating, “We do not remove reports.” FAC ¶ 204 March/May 2009 — AEI allegedly relies on statements; pays $2,390 for third party SEO services; FAC ¶¶ 213–217 October 24, 2009 — AEI allegedly relies on statements; AEI pays $25 for Craigslist ad; FAC ¶ 213 October 29, 2009 — Xcentric agrees to remove report #510675 regarding QED Media in response to demand from Kenton Hutcherson; FAC Exhibit 12 (Doc. #96-12) To support this, ¶ 175 of the FAC discusses (and seriously misrepresents) one example of a settlement Defendants reached in a previous lawsuit in which Xcentric and Magedson were plaintiffs. The settlement agreement (attached as Exhibit 8 to the FAC) does not require Defendants to remove any existing reports, nor does it make any promise to remove reports in the future. Nevertheless, Plaintiffs falsely allege in FAC ¶ 173 that as part of this settlement, Defendants agreed to remove two reports. Representations on Ripoff Report about Defendants’ policies or willingness to remove reports in the future are simply not actionable fraud under any circumstances, even if shown to be false in some hyper-technical sense. However, even if the

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representation regarding reports could support a fraud claim, the facts set forth in the MOTION TO DISMISS 13
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Complaint fail to allege a viable claim because they do not establish that Mr. Magedson’s representations to Mr. Mobrez were false at the time they were made in May and July 2009. At that time, the removal of the report about QED Media had not yet occurred and the email that Mr. Gingras sent about helping a 16-year old girl had not yet occurred. In addition, by the time Xcentric removed the report about QED in late October 2009, Mr. Mobrez had already purportedly relied on Mr. Magedson’s representations by paying money to third party SEO/IT consultants in March and May 2009, see FAC ¶¶ 214–217, and allegedly paying $25 for a listing on Craigslist on October 24, 2009. See FAC ¶ 213. Plaintiffs do not allege that any reliance damages occurred after October 29, 2009. Given these facts and even assuming the allegations in the FAC are true, Plaintiffs have failed to assert a viable claim for wire fraud or any other type of fraud. Here, while it indirectly refers to past events (whether Xcentric ever removed reports in the past) Plaintiffs’ fraud claim is actually predicated entirely upon an assumption about future events—i.e., that because Xcentric may have agreed to remove a report in the past, it should be assumed that Xcentric might also agree to do so in the future for Mr. Mobrez. At its core, this theory requires the court to infer that just because Defendants settled a case based on one set of terms in the past necessarily makes it a fact that all future cases would be settled under the exact same terms. There is no basis for this conclusion and to the extent it requires the Court to draw an inference as to future events based on allegations of how past cases were settled, this is insufficient to state a claim and insufficient to survive dismissal under Rule 12(b)(6); “unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim.” Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1098 n.1 (9th Cir. 2009) (quoting Anderson v. Clow (In re Stac Electronics Securities Litig.), 89 F.3d 1399, 1403 (9th Cir. 1996)). C. Fraud Cannot Be Based On A Statement Of Discretionary Policy

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It is axiomatic that fraud generally requires a false statement of material fact; “The law is quite clear that expressions of opinion are not generally treated as representations of MOTION TO DISMISS 14
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fact, and thus are not grounds for a misrepresentation cause of action.” Gentry v. eBay, Inc., 99 Cal.App.4th 816, 835, 121 Cal.Rptr.2d 703, 718 (4th Dist. 2002) (quoting NeuVisions Sports, Inc. v. Soren/McAdam/Bartells, 86 Cal. App. 4th 303, 308, 103 Cal. Rptr. 2d 159 (4th Dist. 2000)). To the extent Plaintiffs’ fraud claims are based on Defendants’ statements regarding whether they would agree to the removal of reports in future cases, these statements are plainly couched as a policy statement; “we have a uniform policy against removing reports.” FAC ¶ 203(iii). As explained in detail in the “Want to Sue Ripoff

Report?” section attached as Exhibit 13 to the FAC, Ripoff Report extensively discusses and describes its decision not to remove reports as a matter of policy: FAC Exhibit 13 (Doc. 96-13) 2. Our Policy: Why We NEVER Remove Reports
Since the Ripoff Report was started in 1998, our policy has always remained the same – we never remove reports. We will not remove reports even when they are claimed to contain defamatory statements and even if the original author requests it. Some people have criticized this policy as being unfair, but we strongly feel this policy is essential, fair, and far better than the alternative – rampant censorship.

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As a matter of law, statements like this describing a company’s policy are construed as expressions of opinion, not representations of fact. See Neben v. Thrivent Financial for Lutherans, 2004 WL 251838, *6 (D.Minn. 2004) (allegations failed to state a viable fraud claim because defendant’s “description of the process by which it selected general agents to become managing partners is a general statement of policy, not a representation of fact.”) (emphasis added) (citing Martens v. Minn. Mining & Mfg. Co., 616 N.W.2d 732, 740 (Minn. 2000)). Like any other policy, exceptions may be made, but this does not transform Defendants’ policy statement into actionable fraud. To illustrate why this is so, imagine a customer enters an Apple retail store and asks for a free iPhone. Not surprisingly, the MOTION TO DISMISS 15
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clerk responds, “Sorry, we never give out free iPhones. That’s our policy.” Relying on this representation, the disappointed customer then pays $25 for an advertisement on Craigslist asking if anyone would like to donate a free iPhone to him. Later, the customer learns that, in fact, Apple CEO Steve Jobs once gave a free iPhone to someone else as part of the settlement of a dispute. No one would dispute that the clerk did not commit fraud. Like the statement “we do not remove reports,” the statement that people can file rebuttals is also a policy statement. Plaintiffs claim in FAC ¶228 that statement is false, but also allege in FAC ¶244 that they DID file a rebuttal. Obviously, since Plaintiff did file a rebuttal, it is ludicrous for Plaintiff to allege that it is false for Defendant to state that people can write rebuttals. The Court need not accept as true an allegation that is directly contradicted by another allegation. At best, Plaintiffs’ allegations establish that there

may be exceptions to Ripoff Report’s policy of accepting rebuttals to reports. Plaintiff also alleges in ¶230 that the “true facts” are that Ripoff Report makes it “much more difficult to file rebuttals.” Even accepting that allegation as true, it does not state a claim for fraud because (1) there is no allegation that Defendants ever said that filing a rebuttal is just as easy as filing a report; and (2) if Defendants were alleged to have made such a statement it would merely be an opinion. Paragraph 239 of the FAC alleges that filing a rebuttal refreshes Google’s search indexing and raises the page ranking of the negative Report. But, once again, this “fact” does not render any statement alleged to be made by Defendants false. Plaintiff seems to be alleging that the fraud is based upon the omission or the failure to disclose. Defendants however, have no duty to hire search engine experts, research Google rankings and disclose the results to its readers. D. The Fraud Claim as Related to the Legal Opinions Fails Under Fed. R. Civ. P. 9(b) and 12(b)(6)

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On pages 58–63 of the FAC, Plaintiffs accuse Defendants of committing fraud/wire fraud by falsely representing themselves as “authorities in internet and technology law” MOTION TO DISMISS 16
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and then discussing some legal issues. To support this bizarre allegation, Plaintiffs rely heavily on a series of statements made on the Ripoff Report website as reflected in Exhibit 15 (Doc. #96-15) which are essentially Xcentric’s answers to a series of “frequently asked questions” under the topic heading, “Want to sue Ripoff Report?” Although nothing in this section states that Defendants are “authorities in internet and technology law”, and without actually identifying a single incorrect or false assertion of law, Plaintiffs make a general blanket allegation that “Many of these contentions … are either false or opinion wrongly presented as fact or partial truths.” FAC ¶ 257 (emphasis added). To the extent Plaintiffs’ fraud claims are based on this page, dismissal is

appropriate under both Rule 9(b) and Rule 12(b)(6). As this court has already recognized, Fed. R. Civ. P. 9(b) expressly requires any allegations sounding in fraud to be plead with particularity. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (explaining “[a]verments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged … so that [defendants] can defend against the charge and not just deny that they have done anything wrong.”) (quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 2003); Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). To the extent the FAC contains page after page of material quoted from the Ripoff Report website followed by a conclusory assertion to the effect that “something in there is false,” this is insufficient under Rule 9(b). Having already been allowed leave to amend once, the fraud-based claims in the FAC should be dismissed without leave to amend on that basis. In addition, even if Plaintiffs could find any inaccurate statements of law on the Ripoff Report website, “It is well established … that misrepresentations of the law are not actionable as fraud, including under the mail and wire fraud statutes, because statements of the law are considered merely opinions and may not be relied upon absent special circumstances not present here.” Sosa, 437 F.3d at 940 (citing Miller v. Yokohama Tire Corp., 358 F.3d 616, 621 (9th Cir. 2004); see also Caroselli v. First Interstate Bank of MOTION TO DISMISS 17
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Denver, 15 F.3d 1083 (9th Cir. 1993) (“Relying on an adverse party’s statement of the parties’ legal rights is generally not reasonable … .”); California Pharmacy Mgmt., LLC v. Zenith Ins. Co., 669 F.Supp.2d 1152, 1161 (C.D.Cal. 2009) (same). Of course, these cases recognize that “special circumstances” can create an exception to this rule such as when the defendant stands in a fiduciary relationship to the plaintiff. See Miller, 358 F.3d at 621. However, no facts in the FAC are sufficient to show that this case presents “special circumstances” which would make Defendants’ legal comments actionable in fraud. As for fraudulent factual representations, Plaintiffs point to Defendants’ statement that they have “NEVER LOST A CASE”, FAC ¶ 256(iii), and then allege “Defendants have settled cases and defaulted on cases, which is considered tantamount to an unfavorable resolution.” FAC ¶ 257. The problem with this allegation (in addition to the obvious fact that settlement of a case is not tantamount to losing a case) is that as reflected in the exhibits to the Complaint, Defendants did not fail to disclose the fact that a default was entered in the past. Rather, as indicated on page 3 of Exhibit 15 (Doc. #96-15) to the FAC, this issue was fully disclosed: “Now, to be 100% accurate – there was ONE case where a predecessor website to Ripoff Report was sued in a foreign country and a default judgment was entered in the plaintiff’s favor.” (emphasis added). Because the exhibits to the Complaint show this issue was disclosed, Plaintiffs’ have not stated a claim based on the non-disclosure of this point. See Durning, 815 F.2d at 1267 (when considering Rule 12(b)(6) motions, the “court may disregard allegations in the complaint if contradicted by facts established by exhibits attached to the complaint.”) E. Fraud Cannot Be Based On Opinions About the Effectiveness of Rebuttals And About CAP Members

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On pages 52–56 Plaintiffs claim they were defrauded by Defendants’ statements to the effect that “filing a rebuttal is effective and helpful” as a way of responding to a negative report posted on the Ripoff Report website. Plaintiffs claim that they relied on MOTION TO DISMISS 18
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this representation by posting a rebuttal on April 3, 2009. FAC ¶¶ 244, 245. Plaintiffs also claim that certain non-parties have had difficulty filing rebuttals, see FAC ¶ 232, and that one non-party named Tina Norris was harmed as a result of paying $600 to an SEO consultant based on Defendants’ characterization of rebuttals as helpful. FAC ¶ 243. Little discussion of this point is needed because as noted above, “The law is quite clear that expressions of opinion are not generally treated as representations of fact, and thus are not grounds for a misrepresentation cause of action.” are not generally treated as representations of fact, and thus are not grounds for a misrepresentation cause of action.” Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells, 86 Cal. App. 4th 303, 308, 103 Cal. Rptr. 2d 159 (4th Dist. 2000); 34A Cal. Jur. 3d Fraud and Deceit § 21 (noting that “as a general rule, expressions of opinion are not generally treated as representations of fact and thus are not grounds for a misrepresentation cause of action.”); Gentry v. eBay, Inc., 99 Cal.App. 4th 816, 121 Cal. Rptr. 2d 703 (4th Dist. 2002); Bulgo v. Munoz, 853 F.2d 710, 716 (9th Cir. 1988). Whether or not rebuttals are (or are not) “effective” or “helpful” is plainly a statement of opinion, not fact. For that reason, Mr. Magedson’s suggestion that filing a rebuttal is a good idea is not sufficient to state a viable claim for fraud. The California Court of Appeal’s opinion in Gentry v. eBay is extremely useful in demonstrating this point. In Gentry, the plaintiff sued eBay for, inter alia, falsely

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advertising that its feedback system was helpful and trustworthy by making statements such as: “A positive eBay rating is worth its weight in gold.” Gentry, 99 Cal.App.4th at 834. Although the Court of Appeal resolved virtually all of Gentry’s claims in favor of eBay based on CDA immunity, the court also explained, “taking as true the fact eBay makes the statement on its web site that a positive eBay rating is ‘worth its weight in gold,’ such an assertion cannot support a cause of action for negligent misrepresentation regardless of federal statutory immunity because it amounts to a general statement of

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opinion, not a positive assertion of fact.” Id. at 835 (emphasis added) (citing Christiansen v. Roddy, 186 Cal.App.3d 780, 785, 231 Cal.Rptr. 72 (1986)). This same logic applies to Plaintiffs’ assertion that Defendants “mislead the public” by statements to the effect that CAP members are “safe, reliable, and trustworthy”. FAC ¶¶ 266–267. In addition to the fact that Plaintiffs do not allege that they ever did business with any CAP member, these statements are not actionable fraud because they are plainly expressions of opinion, not fact. F. The FAC Fails to Allege A Plausible Claim For RICO Conspiracy

Other than an incorporate-by-reference of all 288 previous paragraphs in the Complaint, the FAC contains one single paragraph (FAC ¶ 290) which purports to outline the factual basis for Plaintiffs’ claim that Xcentric and Magedson engaged in a conspiracy to violate 18 U.S.C. § 1962(c). This paragraph contains nothing more than “[t]hreadbare recital[] of the elements of a cause of action, supported by mere conclusory statements … ” Twombly, 550 U.S. at 555. Because the FAC fails to offer any factual explanation of the RICO/conspiracy claim, this claim should be dismissed without leave to amend. IV. CONCLUSION For all of the foregoing reasons, Defendants request that the Court dismiss the First, Second, Third, Eleventh, and Twelfth Causes of Action in Plaintiffs’ FAC with prejudice for failure to state a claim under Fed.R.Civ.P.12 (b)(6). DATED this 6th day of August, 2010. JABURG & WILK, P.C. /s Maria Crimi Speth Maria Crimi Speth Attorneys for Defendants

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CERTIFICATE OF SERVICE I hereby certify that on August 6, 2010 I emailed and mailed the attached document to: Ms. Lisa Borodkin, Esq. Mr. Daniel F. Blackert, Esq. Asia Economic Institute 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Attorneys for Plaintiffs

/s/Maria Crimi Speth

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Exhibit M

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DANIEL F. BLACKERT, ESQ., CSB No. 255021 LISA J. BORODKIN, ESQ., CSB No. 196412 Asia Economic Institute 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Telephone (310) 806-3000 Facsimile (310) 826-4448 Daniel@asiaecon.org Blackertesq@yahoo.com lisa@asiaecon.org lisa_borodkin@post.harvard.edu Attorneys for Plaintiffs, Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ASIA ECONOMIC INSTITUTE, a California LLC; RAYMOND MOBREZ an individual; and ILIANA LLANERAS, an individual, ) ) ) ) ) ) ) ) ) ) XCENTRIC VENTURES, LLC, an Arizona LLC, d/b/a as BADBUSINESS ) ) BUREAU and/or ) BADBUSINESSBUREAU.COM ) and/or RIP OFF REPORT and/or ) RIPOFFREPORT.COM; BAD ) BUSINESS BUREAU, LLC, organized ) ) and existing under the laws of St. ) Kitts/Nevis, West Indies; EDWARD MAGEDSON an individual, and DOES ) ) 1 through 100, inclusive, ) ) ) Case No.: 2:10-cv-01360-SVW-PJW The Honorable Stephen V. Wilson NOTICE OF MOTION AND MOTION FOR LEAVE TO AMEND PLAINTIFFS’ FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF [[PROPOSED] SECOND AMENDED COMPLAINT LODGED CONCURRENTLY HEREWITH] Date: September 20, 2010 Time: 1:30 p.m. Courtroom: 6

Plaintiffs’ Motion for Leave to Amend the First Complaint-

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TO ALL DEFENDANTS AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE THAT ON September 20, 2010 at 1:30 p.m., in Courtroom 6 of the above-entitled court, located at 312 N. Spring Street in Los Angeles, California, Plaintiffs Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras (“Plaintiffs”) will and hereby does move this Court for an order granting leave to file the [Proposed] Second Amended Complaint, lodged currently herewith, pursuant to Federal Rule of Civil Procedure 15. Plaintiffs wish to dismiss the RICO causes of action under 18 U.S.C. § 1962(c) and (d) to the extent they are based on predicate acts of wire fraud, 18 U.S.C. § 1343. Plaintiffs have requested Defendants to stipulate to the amendment proposed by this Motion, and this Motion should be granted, based upon the following grounds: • First, this Court should permit Plaintiffs to amend the pleadings as Plaintiffs are concurrently filing a Notice of Non-Opposition in response to Defendants’ pending motion to dismiss the First and Second Causes of Action for violations of the RICO statute, 18 U.S.C. § 1962(c) and (d), with wire fraud, 18 U.S.C. § 1343, as the predicate acts, currently set for a hearing date of September 20, 2010 and responding by eliminating those the First and Second Causes of Action, thus mooting Defendants’ pending Motion to Dismiss; • Second, this Court should permit Plaintiffs to amend the pleadings because this Court has bifurcated the action to address RICO claims only and Plaintiffs will promptly notice and file a motion for September 20, 2010 to remand the remaining causes of action, which all arise under state law, to California Superior Court for the County of Los Angeles; • Third, this Court should permit Plaintiffs to amend the pleadings in the interests of justice and judicial economy, as the proposed amendment

Plaintiffs’ Motion for Leave to Amend the First Complaint-

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eliminates the federal causes of action, leaving only Plaintiffs’ state law causes of action, on which this Court has not yet ruled; • Fourth, this Court should permit Plaintiffs to amend the pleadings because Defendants have formally requested Plaintiffs to strike or withdraw certain factual allegations and the proposed amendment eliminates certain of those factual allegations without adding new allegations, thus streamlining and narrowing the issues for litigation. The Motion shall be based upon this Notice, the attached Memorandum of Points and Authorities, a copy of the proposed Second Amended Complaint, which is attached hereto, and such other and further matters that may be presented at the hearing thereof. This Motion is made following Plaintiffs’ written request on August 14, 2010 to arrange a conference of counsel in accordance with Local Rule 7-3, to which Defendants did not respond. Respectfully submitted, DATED: August 16, 2010 By: /s/ Daniel F. Blackert DANIEL F. BLACKERT LISA J. BORODKIN Attorneys for Plaintiffs, Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras

Plaintiffs’ Motion for Leave to Amend the First Complaint-

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Table of Contents I. II. Introduction……………………………………………………………….. 1 Argument…………………………………………………………………. 2 A. Judicial Policy Dictates That Courts Grant Leave to Amend Liberally So That Cases Are Decided on the Merits……………………….. 2 B. The Factors That Courts Consider In Determining Whether to Grant Leave to Amend Weigh In Favor of Permitting Plaintiffs to File the Proposed Second Amended Complaint…………………………………….. 2 1. Defendants Cannot Show Prejudice Because They Have Moved to Dismiss the First and Second Causes of Action for Violations of RICO Predicated on Wire Fraud, Which Are Eliminated in the Proposed Second Amended Complaint. and Plaintiffs Filed a Notice of Non-Opposition as to the Motion to Dismiss the First and Second Causes of Action...…………………………………... 3 2. Defendants Cannot Show Prejudice Because the State Law Claims Have Been Bifurcated from the RICO Claims and Cannot Show Delay Because Plaintiffs Will Promptly Move for Remand ……………………………………………………………………. 4 3. Defendants Cannot Show Prejudice because they have Requested Plaintiffs to Strike the Factual Allegations Eliminated from the Proposed Second Amended Complaint and There Has Been No Delay in Seeking the Amendment.……………………………….. 5 4. Defendants Cannot Show Prejudice or Delay Because Plaintiffs Promptly Asked Defendants To Stipulate to the Filing of the Second Amended Complaint ………………………….………… III. Conclusion………………………………………………………………………

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Plaintiffs’ Motion for Leave to Amend the First Complaint-

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MEMORANDUM OF POINTS AND AUTHORITIES I. Introduction This Court has bifurcated this action to consider only the federal causes of action arising under the RICO statute. DN-94 at 53. Pursuant to this Court’s Order of July 19, 2010 (DN-94), Plaintiffs filed their First Amended Complaint on July 27, 2010 (DN-96). Defendants responded with a motion to dismiss on August 6, 2010 (DN-110). In addition, on August 3, 2010, Defendants served a proposed motion under Federal Rule of Civil Procedure 11 requesting that Plaintiffs correct or amend the First Amended Complaint to eliminate certain claims and allegations. In response to the pending Motion to Dismiss and Defendants’ request to correct or amend the pleadings, Plaintiffs filed a Notice of Non-Opposition as to the First and Second Causes of Action. DN-115. Plaintiffs now seek leave to file a Second Amended Complaint that would eliminate the First and Second Causes of Action for RICO violations targeted in Defendants’ Motion To Dismiss. Plaintiffs requested Defendants to stipulate to the filing of the Second Amended Complaint to resolve the pending Motion to Dismiss and to some of Defendants’ Rule 11 request, but Defendants did not respond. See Declaration of Daniel F. Blackert (DN-114) at ¶5. Plaintiffs will, concurrently with the Motion to Dismiss and this Motion for Leave to Amend the Pleadings, move for an order remanding the remaining state law causes of action to state court. This Court has not ruled on the merits of Plaintiffs’ state law claims and there has been no delay from the proposed amendment. Therefore, Plaintiffs respectfully request that this Court honor the strong policy favoring liberal amendment of pleadings, and grant Plaintiffs leave to file the proposed Second Amended Complaint, lodged concurrently herewith, eliminating the RICO claims predicated on wire fraud and certain factual allegations as requested by Defendants.

Plaintiffs’ Motion for Leave to Amend the First Complaint-

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II.

Argument A. Judicial Policy Dictates that Courts Grant Leave to Amend Liberally

So that Cases Are Decided on the Merits. According to Federal Rule of Civil Procedure 15, "a party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served…[o]therwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party." Fed. R. Civ. P. 15(a). Where leave of the court is sought, Rule 15 states, "[L]eave shall be freely given when justice so requires." Id. In Foman v. Davis, the Supreme Court held that [i]n the absence of any apparent or declared reason – such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. – the leave sought should, as the rules require, be "freely given." See Foman v. Davis, 371 U.S. 178, 182 (1962). In Advanced Cardiovascular Sys., Inc. v. SciMed Life Sys., Inc., the Court stated that "the court must be very liberal in granting leave to amend a complaint," noting that "[t]his rule reflects an underlying policy that disputes should be determined on their merits, and not on the technicalities of pleading rules." See Advanced Cardiovascular Sys., Inc. v. SciMed Life Sys., Inc., 989 F.Supp. 1237, 1241 (N.D. Cal. 1997). B. The Factors Considered by Courts In Granting Leave to Amend Favor Permitting Plaintiffs to File the Second Amended Complaint. A district court should consider the following factors when deciding whether to grant leave to amend: (1) undue delay; (2) bad faith; (3) repeated failure to cure
Plaintiffs’ Motion for Leave to Amend the First Complaint2

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deficiencies by amendments previously allowed; (4) undue prejudice to the opposing party by virtue of allowances of the amendment; and (5) futility of amendment. See Forman, 371 U.S. at 182. Prejudice to the opposing party is “the most critical” of all the factors: “Where there is a lack of prejudice to the opposing party and the amended complaint is obviously not frivolous, or made as a dilatory maneuver in bad faith, it is an ‘abuse of discretion’ to deny leave to amend.” See Howey v. United States, 481 F.2d 1187, 1190 (9th Cir. 1973). Because there has been no delay, there is no evidence of bad faith, failure to cure deficiencies, undue prejudice, or futility of amendment, good cause exists to allow Plaintiffs leave to file the Proposed Second Amended Complaint eliminating the RICO claims predicated on wire fraud and certain factual allegations, and allowing Plaintiffs leave to seek remand of the remaining state law claims to state court. 1. Defendants Cannot Show Prejudice Because They Have Moved to Dismiss the First and Second Causes of Action for Violations of RICO Predicated on Wire Fraud, Which Are Eliminated in the Proposed Second Amended Complaint, and Plaintiffs Filed a Notice of Non-Opposition as to the Motion to Dismiss the First and Second Causes of Action. The party opposing amendment bears the burden of showing prejudice. See DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). Here, the Defendants cannot show that they will suffer prejudice if the amendment is allowed. The purpose of the Second Amended Complaint is to respond to Defendants’ motion to dismiss regarding the First and Second Causes of Action for RICO violations predicated on wire fraud by eliminating those claims targeted in Defendants’ motion. Therefore, Defendants will not be able to show any prejudice by allowing the filing of the Second Amended Complaint.
Plaintiffs’ Motion for Leave to Amend the First Complaint3

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2. Defendants Cannot Show Prejudice Because the State Law Claims Have Been Bifurcated from the RICO Claims and Cannot Show Delay Because Plaintiffs Will Promptly Move for Remand. Secondly, Defendants are not prejudiced because since April 19, 2010, this Court had already bifurcated the action to consider only the federal RICO claims and (DN-23), and in the Order of July 19, 2010 stated that Defendants’ dispositive motion with respect to the state law claims was “inappropriate” (DN-94 at 17:1320) and confirmed that this action remains bifurcated (DN-94 at 53-15). Therefore, if this Court allows Plaintiffs to file the Proposed Second Amended Complaint, only state law claims will remain. Plaintiffs have alleged state law fraud claims, thereby rendering the RICO claims based on wire fraud duplicative and extraneous. There has been no delay in seeking amendment. Plaintiffs will be filing a motion to remand this action back to state court. The motion will be heard concurrently with Defendants’ Motion to Dismiss. Plaintiffs filed a Notice of NonOpposition to Defendants’ Motion to Dismiss as to the First and Second Causes of Action arising under RICO. DN-115. However, as stated in the Notice of NonOpposition, Plaintiffs believe that Defendants’ Motion to Dismiss was inappropriate as to the Third, Eleventh and Twelve Causes of Action arising solely under state law because this Court has bifurcated the action to address only federal claims. DN-115 ¶¶D-F, DN-94 at 53. Because this Court would have had discretion to retain or decline jurisdiction over the state law claims if the Motion to Dismiss were granted, the net effect of Plaintiffs filing its Notice of Non-opposition to the Motion to Dismiss and simultaneously seeking a remand of the action to state court is not to delay any resolution on the state law claims on the merits, and in fact conserves this Court’s resources in eliminating an unnecessary hearing on the motion to dismiss.
Plaintiffs’ Motion for Leave to Amend the First Complaint4

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3. Defendants Cannot Show Prejudice because they have Requested Plaintiffs to Strike the Factual Allegations Eliminated from the Proposed Second Amended Complaint and There Has Been No Delay in Seeking the Amendment. Thirdly, Defendants have asked Plaintiffs to strike many of the factual allegations that will be eliminated in the Second Amended Complaint. Therefore, the filing of the Second Amended Complaint would amount to Plaintiffs giving Defendants what they have requested. Although Plaintiffs did not eliminate each and every allegation requested to be withdrawn or corrected by Defendants, the Second Amended Complaint omits a significant number of the factual allegations objected to by Defendants as superfluous, and did not add any additional factual allegations. Therefore, the elimination of certain factual allegations will help to streamline and narrow this litigation for consideration of the state law claims on the merits. 4. Defendants Cannot Show Prejudice or Delay Because Plaintiffs Promptly Asked Defendants To Stipulate to the Filing of the Second Amended Complaint. Finally, Plaintiffs contacted Defendants in attempt to stipulate to the filing of the Second Amended Complaint eliminating the RICO claims. Defendants never responded to these attempts. See Declaration of Daniel F. Blackert (DN-114) at ¶5. However, these attempts to stipulate put Defendants on notice that Plaintiffs would seek leave to file the Second Amended Complaint. Plaintiffs are lodging concurrently herewith the Proposed Second Amended Complaint, exclusive of exhibits, which are the same as those filed with the First Amended Complaint. If this motion is granted, Plaintiffs will file the Second
Plaintiffs’ Motion for Leave to Amend the First Complaint5

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Amended Complaint along with a complete set of exhibits, and with a manual paper filing in accordance with Local Civil Rule 7-3. Therefore, Defendants cannot show prejudice from the proposed amendment. III. Conclusion For the foregoing reasons, the motion should be granted. Respectfully submitted, DATED: August 16, 2010 By: /s/ Daniel F. Blackert DANIEL F. BLACKERT LISA J. BORODKIN Attorneys for Plaintiffs, Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras

Plaintiffs’ Motion for Leave to Amend the First Complaint-

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Daniel F. Blackert, (SBN 255021) blackertesq@yahoo.com Lisa J. Borodkin, (SBN 196412) lisa_borodkin@post.harvard.edu ASIA ECONOMIC INSTITUTE, LLC 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Telephone (310) 806-3000 Facsimile (310) 826-4448 Attorneys for Plaintiffs Asia Economic Institute, LLC, Raymond Mobrez, and Iliana Llaneras UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ) Case No.: 2:10-cv-01360-SVW-PJW ) ) ) SECOND AMENDED COMPLAINT FOR: ) ) ) (1) UNFAIR BUSINESS PRACTICES -) CAL. BUS. & PROF. CODE § 17200 et ) Plaintiffs, seq. ) ) (2) DEFAMATION vs. ) (3) DEFAMATION PER SE ) XCENTRIC VENTURES, LLC, ) (4) INTENTIONAL INTERFERENCE an Arizona LLC, doing business ) WITH PROSPECTIVE ECONOMIC ) as BADBUSINESS BUREAU, ) RELATIONS ) (5) NEGLIGENT INTERFERENCE RIPOFF REPORT, and ) RIPOFFREPORT.COM, WITH PROSPECTIVE ECONOMIC ) BAD BUSINESS BUREAU, ) RELATIONS ) (6) NEGLIGENT INTERFERENCE LLC, organized and existing ) under the laws of St. Kitts and ) WITH ECONOMIC RELATIONS ) (7) DECEIT Nevis, West Indies; EDWARD ) MAGEDSON an individual, also ) (8) FRAUD ) (9) INJUNCTION known as EDWARD MAGIDSON also known as the ) JURY TRIAL DEMANDED ) “Editor,” and DOES 1 through ) ) 100, inclusive, ) )) ) Defendants. ASIA ECONOMIC INSTITUTE, LLC, a California LLC; RAYMOND MOBREZ an individual; and ILIANA LLANERAS, an individual,

Amended Complaint - 1

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Plaintiffs Asia Economic Institute, LLC (“Asia Economic Institute” or “AEI”), Raymond Mobrez (“Mobrez”) and Iliana Llaneras (“Llaneras”) (collectively, “Plaintiffs”) complain of defendants Xcentric Ventures, LLC doing business as Ripoff Report, Bad Business Bureau, RipoffReport.com and BadbusinessBureau.com (“Xcentric”), Bad Business Bureau LLC (“Bad Business Bureau”) and Edward Magedson, also known as Ed Magedson, also known as Edward Magidson, also known as “the EDitor” (“Magedson”) (collectively, “Defendants”), and alleges as follows: I. JURISDICTION AND VENUE 1. 2. This action arises under California law and the amount in controversy Jurisdiction is proper pursuant to Cal. Civ. Pro. Code § 410.10. Each exceeds the jurisdictional minimum of this Court. Defendant has sufficient minimum contacts with California, is a citizen of California, or otherwise purposefully avails itself of benefits from California or doing business in California so as to render the exercise of jurisdiction over it by the California courts consistent with traditional notions of fair play and substantial justice. 3. a. b. Specifically, this Court has personal jurisdiction over Defendants because of the following: In an email from Defendant, Magedson to Plaintiff, Mobrez, Magedson claims to reside in California; Defendants solicit donations from individuals and businesses in California; Defendants have received donations from individuals and businesses in California; Users of Defendants’ websites reside in California; Individuals and businesses in California have purchased merchandise from Defendants’ websites; Defendants sell advertising space to businesses located in California; Individuals and businesses located in California have and continue to be enrolled in the CAP program; and
Amended Complaint - 2

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c. d. e. f. g.

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h.

4.

Defendants’ legal directory –located on Defendants’ websites- posts a listing of California attorneys who will litigate lawsuits (mostly class actions) for individuals and business who have allegedly been ripped off. Venue is proper pursuant to Cal. Civ. Pro. Code § 395. Defendants’

obligation and liability arises in this county because Defendant’s unlawful conduct substantially occurs in this judicial district and Defendants solicit and engage in business within this judicial district. II. THE PARTIES 1. Plaintiff Asia Economic Institute is a limited liability company and, at all times relevant hereto, organized and existing pursuant to the laws of the State of California, and is authorized to do business in the State of California. Plaintiff Asia Economic Institute has its principal place of business at 11766 Wilshire Boulevard, Suite 260, Los Angeles, California 90025. AEI is currently in business however has been unable to generate any income due to the defamatory reports appearing on Defendants websites. 2. Plaintiff Mobrez is an individual and, at all times relevant hereto, a resident of Los Angeles, California, County of Los Angeles. Plaintiff Mobrez is a principal and manager of Asia Economic Institute, LLC. In addition, as a California-licensed broker, Mr. Mobrez derives a significant amount of revenue from brokering commercial real estate transactions. 3. Plaintiff Llaneras is an individual and, at all times relevant hereto, a resident of California, County of Los Angeles. Plaintiff Llaneras is a principal and manager of Asia Economic Institute, LLC. In addition, as a California-licensed broker, Ms. Llaneras derives a significant amount of revenue from brokering commercial real estate transactions. 4. Defendant Xcentric is a limited liability company organized and existing pursuant to the laws of the State of Arizona with its purported domestic address as P.O. Box 470, Phoenix, Arizona 85280. Plaintiffs are informed and
Amended Complaint - 3

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believe and thereon allege that Xcentric is owned by a single member, Creative Business Investment Concepts, Inc., a Nevada corporation located at 2533 North Carson Street, Carson City, Nevada 89706. Defendant Xcentric transacts business in interstate commerce as, inter alia, “Ripoff Report,” an enterprise, located in this judicial district and elsewhere in California and Arizona, and employs, contracts with and engages individuals, partnerships and business entities, who share the common goals of perpetuating the goals and purpose of the Ripoff Report enterprise, pursuant to long-term relationships, drawing from the same pool of associates and spanning several years, from at least 2005 to the present, and sharing in the substantial financial and other benefits derived therefrom. 5. Plaintiffs are informed and believe and thereon allege that Xcentric operates or manages the Ripoff Report enterprise and substantially directs many of its activities and operations, including selling goods and services; acquiring exclusive, perpetual, world-wide copyrights in original text and graphical content about businesses, consumer goods and services, as well as the intimate personal lives of private individuals, in the form of “reports” (“Rip-off Reports” or “Reports”),1 “rebuttals” and “comments”; writing and producing original, paid, sponsored endorsements and testimonials of consumer businesses, goods and services – often substantially co-written by the subjects themselves – as “investigations” and “notices”; thereafter distributing, displaying, publishing, continuously republishing, indexing, and optimizing for the Web such acquired and paid, self-produced content to make the content interactive and easily searchable by commercial Internet search engines; advertising against such acquired and self-produced, paid content, deriving revenues based in part on demonstrated analytics including numbers of unique visitors, page views and ad clicks; attracting visitors to its website for the purpose of selling them goods and
For avoidance of confusion, Defendants’ business is referred to herein as “Ripoff Report”

while the reports themselves are referred to as “Rip-off Reports” or “Reports.”
Amended Complaint - 4

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services, increasing its analytics, enhancing the website’s “authority” or “reputation” with Internet search engines, and soliciting additional content to add to its massive compilation of business, consumer and personal data; and creating, modifying, customizing or licensing software code, database architecture, network and computer programming. In operating or managing the Ripoff Report enterprise, Xcentric uses instrumentalities of interstate commerce, specifically wire, including through websites hosted at the domain names “ripoffreport.com,” “badbusinessbureau.com,” “ripoffreport.net” and “ripoffreport.org,” among others, all of which redirect to the Uniform Resource Locator (“URL”) for Defendants’ primary website, http://www.ripoffreport.com (the “ROR Website”, sometimes “ROR”) and self-hosted electronic mail services operated through the “ripoffreport.com” domain name. Plaintiffs are informed and believe and thereon allege that the domain names for the ROR Website and electronic mail services are registered by directNIC, located at West Bay, Grand Cayman, hosted by Intercosmos Media Group, Inc. with servers located in Ankara, Turkey, and directed, operated and controlled from Maricopa County, Arizona. 6. Plaintiffs are informed and believe and thereon allege that Defendant Bad Business Bureau is, or was at times relevant hereto, a limited liability company organized and existing pursuant to the laws of Saint Kitts or Nevis, West Indies. Defendant Bad Business Bureau is or was the predecessor to Xcentric in operating and managing the Ripoff Report enterprise and is or was otherwise associated with the Ripoff Report enterprise. 7. Defendant Edward Magedson, also known as Ed Magedson, also known as Edward Magidson, also known as “the EDitor (“Magedson”) is an individual and, at all times relevant hereto, a resident of the State of Arizona and/or the State of California and, by his own admission, represented himself at certain times relevant hereto as present in the State of California. Magedson is the Manager of Xcentric and Bad Business Bureau, the “Editor” of Ripoff Report and operates and manages activities of the Ripoff Report enterprise, including by, inter
Amended Complaint - 5

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alia, making top-level policy, business, risk management, legal and strategy decisions, sometimes in consultation with outside counsel; operating and managing business conducted through the ROR Website; administering its Corporate Advocacy and Remediation Program; performing investigations of the veracity of the contents of certain reports; writing and publishing findings; collaborating with the subjects of paid testimonials and endorsements in writing original content about them and publishing it through the ROR Website; communicating with individual subjects of reports by electronic mail, particularly to urge them to file rebuttals or comments to existing Reports; supervising or acting in association with a currently unknown individual identified only by the electronic mail address “Karen@ripoffreport.com” at certain times relevant herein, whose duties included responding to complaints that rebuttals were not posting or were being posted to the wrong reports; engaging, supervising and collaborating with counsel to draft significant and influential portions of the ROR Website and otherwise. Magedson uses instrumentalities of interstate commerce to conduct these activities, specifically wire. 8. Xcentric and its associates in the Ripoff Report enterprise use extremely aggressive litigation strategies to, inter alia, protect and perpetuate its business model, and silence and retaliate against their critics, including by affirmatively initiating an Arizona state court action against Washington Statebased attorney and search engine optimization consultant and blogger Sarah L. Bird, Xcentric Ventures LLC v. Bird, (D. Ariz. 09-cv-1033) which action was dismissed on jurisdictional grounds and is currently on appeal to the Ninth Circuit Court of Appeals (10-1546); initiating an Arizona state court defamation action against Phoenix New Times reporter Sarah Fenske, her husband, a source for an article, the source’s spouse and the publishers, Xcentric v. Village Voice Media, CV2008-2416 (Arizona Sup. Ct. for Maricopa County); and is currently opposing an appeal to the Seventh Circuit (10-1167) in Blockowicz v. Williams, 675 F.

Amended Complaint - 6

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Supp. 2d 912 (N.D. Ill. 2009) (09-cv-3955) regarding its purported right to defy compliance with a permanent injunction ordering it to remove defamatory content. 9. The Ripoff Report enterprise until approximately May or June 2010 had a regular business practice of secretly recording or causing to be recorded all telephone conversations to its business telephone number, in association with an unidentified vendor, without disclosure to or consent of all parties to the telephone conversations, in violation of, inter alia, the wiretapping laws of the State of California. The Ripoff Report has used or attempted to use the contents of such secret recordings as a surprise litigation tactic in actions in, inter alia, California and Arizona. Defendants used instrumentalities of interstate commerce, specifically wire, to record such telephone calls. 10. The true names and capacities, whether individual, corporate, or otherwise, of Defendants DOES 1 to 100 are unknown to Plaintiffs at the present time, which therefore sue such Defendants by fictitious names, and will amend this Complaint to show their true names and capacities when ascertained. Plaintiffs are informed and believe and thereon allege that each of the defendants assigned as a DOE is responsible in some manner for the events and happenings herein referred to, and thereby proximately caused injuries and damages to the Plaintiffs. Plaintiffs will amend this complaint to add as defendants in this action those individuals and entities who have assisted Defendants in perpetrating the acts and omissions complained of herein, including additional individuals and entities complicit in managing and operating the affairs of the Ripoff Report enterprise. III. SUMMARY OF THE ALLEGATIONS 11. The Ripoff Report enterprise takes advantage of the average person’s

lack of sophistication in technology, reliance on Internet search engines, and general lack of time. It misrepresents its true nature to the public and places its
Amended Complaint - 7

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victims in desperate positions through elaborate technological and legal traps and artifices. It then intimidates and defrauds its victims into believing that the only practical way of saving their good names is to defend them on its home turf, the ROR Website, where it makes the rules, it decides who gets heard, and most of all, it makes money. Many do, not realizing until it is too late, that they are only aggravating their injuries and enriching Defendants by doing so. 12. The Ripoff Report enterprise is the ultimate Internet “troll.”2 It survives and earns revenues through a fraudulent scheme (the “Content Trolling Scheme”) by building a huge database of controversial content about other people and businesses (“victims” or “subjects”), which it then enhances for search engines and advertisers, often with additions from the victims themselves. The Ripoff Report enterprise runs the Content Trolling Scheme by tricking its victims through various misrepresentations of material fact conveyed through the ROR Website and in electronic mail, and otherwise furthered by use of the wires, into believing there is no legal redress for them in the courts, that the Reports will forever remain as a “Scarlet Letter” on their permanent records, and that their best available option is to file a rebuttal. 13. The Ripoff Report enterprise solicits purely negative, often hateful and extremely personal – and in many instances, judicially recognized as defamatory – content in the form of Rip-off Reports. The Ripoff Report enterprise acquires ownership of all content contributed through the ROR Website under an exclusive grant of copyright before it is ever published to the web. Before publishing Reports, the Ripoff Report enterprise conducts its own-pre-publication review, whereby it filters out the positive and publishes only the negative, sometimes redacting or disclaiming portions of the content, at times in a manner
Wikipedia defines an Internet troll as “someone who posts inflammatory, extraneous, or off-

topic messages in an online community, such as an online discussion forum, chat room, or blog with the primary intent of provoking other users into a desired emotional response.”
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that significantly changes its meaning, and in certain cases (often under a financial arrangement) adds additional content that completely transforms or negates its meaning, or, for a fee, suppresses the Reports from publication altogether. 14. Cloaked in the false disguise of a consumer advocate, the Ripoff Report enterprise purports to advise the victims of the Content Trolling Scheme that the “best” thing they can do is to file a “free” rebuttal. Unbeknownst to the victims, the “free” rebuttals come at a cost. A rebuttal is likely to make the negative content in a Report go up in page rank in search engine queries, while doing nothing to alter the snippets of negative content that appear as search results. The Ripoff Report enterprise does not disclose its own financial self-interest in having victims file rebuttals –fresh content and page visits that make the ROR Website more attractive to search engines and online advertisers. The Ripoff Report enterprise does not disclose that some Reports do come down, and are materially altered or suppressed, for a price. Without knowing all this, the victims file rebuttals. The Ripoff Report enterprise then leads its victims down a path toward applying for the Corporate Advocacy Program, which promises to turn a negative into a positive, and seeking either exorbitant fees or tax returns and personal information, and conditioning acceptance in to the program on repeated “admissions of responsibility” more akin to the Salem Witch Trials or Spanish Inquisition than an outsourced customer satisfaction program. 15. By the time the victims realize that the best way of dealing with a Report may be to let it sink to the bottom over time, the damage has often been done. The victims have sat on their rights, business has evaporated, houses have gone into foreclosure, and the Reports have been pushed so far up in page rankings that it takes significant additional money and time to post alternative, positive content about themselves to the Web to undo the damage to their online reputations. 16. The Ripoff Report enterprise profusely claims that “Reports” never come down. But, for a price, the Ripoff Report enterprise will sell something even
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more valuable – the opportunity to change a negative Google search engine result into a positive. The Ripoff Report enterprise markets the Corporate Advocacy Program (“CAP”) to the subjects of Reports, typically after strongly urging them to file rebuttals. By joining CAP or otherwise making financial arrangements with the Ripoff Report enterprise, a subject can buy the privilege of essentially writing (or approving) her own Google search result. The CAP member writes or approves between 250 and 350 additional words of positive content that will be inserted into the body of a Report and also in a known strategic location in the HTML for the Report. 250 words is just the right amount of text to push the surrounding negative content so far down in the HTML as to be irrelevant to search engines. Thus, negative content virtually disappears from the Google search results for CAP members, replaced by the words approved by the CAP member. Because Google’s search algorithms are generally influenced to select text that “matches,” between both a web page and the corresponding HTML (that is, identical text that is present in both), putting the positive content in the strategic location in the HTML, along with a matching block of test in the Report effectively negates the harmful effect of the Report with the Google search engine, while allowing Defendants to continue claiming (falsely) that they “never remove Reports.” 17. There are at least two ways to get into CAP. One is to follow the application process, admit fault, sign away important legal rights, and pay exorbitant prices starting at thousands of dollars over a three-year period. The other way is to sue Defendants. In order to preserve the fiction that they “never lose a case” and that plaintiffs pay all their attorneys’ fees, the Ripoff Report enterprise sometimes settles difficult cases by channeling the plaintiffs into CAP or similar arrangements.

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IV. FACTUAL ALLEGATIONS COMMON TO ALL CLAIMS A. Defendants’ Business and the ROR Website 18. Defendants Xcentric, Bad Business Bureau and Magedson, doing

business as “Bad Business Bureau” and “Ripoff Report,” together and in association with other individuals, partnerships and business entities, including employees, contractors, consultants, counsel, service providers and other participants, acting with a common purpose, pursuant to relationships among those associated with the Ripoff Report enterprise, with longevity sufficient to pursue the purposes of the Ripoff Report enterprise, operate and manage the affairs of the Ripoff Report enterprise, often through the ROR Website. 19. Defendants control other domain names that redirect visitors to the The Ripoff Report enterprise transacts a substantial ROR Website, including, inter alia, ripoffreport.net, ripoffreport.org, and badbusinessbureau.com. amount of its affairs through the domain name “ripoffreport.com,” both through the ROR Website and through electronic mail emanating from email addresses including 20. info@ripoffreport.com, Editor@ripoffreport.com and karen@ripoffreport.com. The Ripoff Report enterprise must be viewed for what it is – a selfinterested business model, not a disinterested consumer advocacy or consumerprotection, public service. The Ripoff Report enterprise is a for-profit business. The Ripoff Report enterprise earns revenues from the sale of goods and services and Web-based advertisements, which generate revenues based in part upon analytics including, Internet visitor traffic, page visits, page views, length of visit, number of clicks on advertisements and links, and link referrals to paid advertisements, whether under a revenue-sharing agreement or fee for advertising model.
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21.

The Ripoff Report enterprise uses instrumentalities of interstate

commerce, specifically wire, to further its purposes, including conducting the “Content Trolling Scheme” and other schemes that protect its revenues and power. 22. The Ripoff Report enterprise conducts its “trolling” on two levels. One is on the visible, superficial level of what it publishes on web pages at the ROR website, in the contents of the Reports, rebuttals, comments, advertisements and editorials. The Ripoff Report enterprise painstakingly frames any legal challenge to its practices solely as a challenge to its conduct on this first, visible, two-dimensional plane. 23. However, the true, three-dimensional space in which the Ripoff Report enterprise conducts its “trolling” for content, page views and visitors occurs on the level of the dynamic, semantic computer code that makes the first level of content searchable and interactive. For each web page comprising the ROR Website, there is an accompanying page of Hypertext Markup Language code (“HTML”). The HTML for a web page is responsible for generating what people see on their Internet browsers, influences how the page ranks with search engines, and influences what appears in the snippets of content displayed as search engine results, which is often the public’s first impression of any web page on the Internet. 24. The Ripoff Report enterprise determines not only what goes into web pages, but also what goes into the HTML, by design and continual improvement of its database, user interface and system architecture. 25. The Ripoff Report enterprise has designed its systems to generate web pages from content it acquires, and also the HTML for such web pages. Simply put, the web pages are written in plain, generally understandable English language, readily visible and comprehensible to a web visitor of ordinary sophistication. 26. The HTML for such web pages is written in dynamic, semantic computer code, using generally accepted elements that express intentions, ideas and conduct readily understandable to a person of moderate to advanced

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sophistication in HTML, but likely not visible, noticeable to a casual Google searcher making snap impressions based on a few search results. 27. The Ripoff Report enterprise knowingly, deliberately and with intent to deceive, exploits the gap between web pages and their respective HTML. The Ripoff Report enterprise has designed its servers and databases so that for ordinary Reports, the “matching” text in the body of the web page and the header of the HTML is generally negative, combined with the subject’s name as keywords. 28. However, for money, the Ripoff Report Enterprise will allow a subject to rewrite the “matching” portion of text that will be identical in the Report and in the HTML, and thus influencing Google to display a positive search result for the subject. 29. An advertising-supported Internet business model such as the Ripoff Report enterprise supports itself and earns revenues by attracting visitors to the content it publishes on the Web. As an advertising-supported business, the Ripoff Report enterprise must constantly acquire or generate content that will attract visitors. Therefore, like many Internet-based content publishers, the Ripoff Report enterprise aggressively solicits original content in the form of contributions or submissions and generates original content of its own, for publication and continual republication, for the purpose of advertising against it. 30. The ROR Website comprises over 500,000 unique web pages organized and hosted through the domain name ripoffreport.com and stored on servers owned or controlled by the Ripoff Report enterprise. The Ripoff Report enterprise copiously represents through the ROR Website, in electronic mail and in filings in the public records that it does not remove, depublish or delete content from its database. Therefore, the amassed stored content owned by the Ripoff Report enterprise is constantly increasing, thereby increasing the total number of web pages comprising the ROR website and associated database, and thereby increasing opportunities for attracting visitors to the ROR website to which it can

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serve advertisements, and in turn enhancing the various analytics that determine the advertising revenues that the Ripoff Report enterprise can earn. 31. The ROR Website gains so-called “authority,” or favorable page ranking, with Internet search engines based on a numbers of factors. These include the overall number of web pages, the quality of the content and links, the more fresh content it posts, the more often it is linked to, and the more frequently its content is updated, including by comments and “rebuttals.” 32. In addition to selling two-dimensional advertisements on its static web pages, Ripoff Report also sells links to paid advertisements in the body of the “rebuttals” that users post to its web pages. 33. Ripoff Reports offers programs such as the “Verified Safe” program, under the tagline “businesses you can trust!” and the “Corporate Advocacy Program,” described as a “Business Remediation and Consumer Satisfaction Program. . . . a long name for a program that does a lot for both the consumer and businesses alike.” 34. While the goals of consumer self-help, providing a place to report scams and rip-offs and generally exercising First Amendment-protected “pure expressive speech” rights are noble, Ripoff Report does much more, behind the scenes, that destroys livelihoods, reputations and businesses. B. 35. Rip-Off Reports and the ROR Website’s Terms of Service As part of the Content Trolling Scheme, the Ripoff Report enterprise

holds the ROR Website out to the public and in judicial tribunals as a consumer review website or public discussion forum. 36. Ripoff Report purports to serve the public as “by consumers, for consumers,” urging the public to contribute reports of “scams, consumer complaints, and frauds” under mottos such as “Let the truth be known!” These reports are referred to hereinafter as “Rip-off Reports” or “Reports.
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37. 38.

The ROR Website will not publish positive reviews. The only positive Not all Rip-off Reports are about companies with shady business

material that can be posted are rebuttals and comments. practices or individuals engaging in fraud or deceit. The ROR Website hosts, and has hosted “Rip-off Reports” concerning the deeply private details of the lives, habits and health conditions of individuals, including purported reports of individuals’ alleged “mental health” problems, attributing to individuals “sexually transmitted diseases,” “substance abuse” habits and other deeply personal, private details, along with names and home addresses. 39. The ROR Website differs from other community websites or public discussion forums in several unusual ways. Ripoff Report does not merely host the Rip-off Reports. Ripoff Report takes ownership of the copyright of every Report, rebuttal and user comment before it is even published to the Web, under the Copyright Act, 17 U.S.C. § 101. Thus, at the time of publication, Ripoff Report is the exclusive owner of all content that is posted to the ROR Website. 40. This is because, unlike community websites such as Facebook, Craigslist, and Roommates.com, Ripoff Report makes it mandatory for a user wishing to contribute content to the ROR Website to register and accept the ROR Website’s Terms of Service, which requires an automatic, exclusive grant of copyright in all user submissions to Ripoff Report before the user can contribute. 41. A true and correct copy of the ROR Website’s Terms of Service, as they existed on April 3, 2009 (and identical today with respect to Paragraph 6) are attached as Exhibit “1” and is incorporated herein by this reference. Paragraph 6 of the ROR Website’s Terms of Service provides that a user wishing to use the site grants Ripoff Report an irrevocable, perpetual, exclusive, world-wide license for certain rights exclusive to copyright holders, before they can post anything to a public area: “6. Proprietary Rights/Grant of Exclusive Rights

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3

By

posting

information

or

content

to

any

public

area

of

www.RipoffReport.com, you automatically grant, and you represent and warrant that you have the right to grant, to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute such information and content and to prepare derivative works of, or incorporate into other works, such information and content, and to grant and authorize sublicenses of the foregoing.” Exhibit 1, Paragraph 6. 42. Because the rights to copy, display, perform, and prepare derivative works are among the exclusive rights comprised in a copyright, and Paragraph 6 of the ROR Website’s Terms of Service is an exclusive license of these rights, Paragraph 6 of the ROR Website’s Terms of Service constitutes a “transfer of copyright ownership”3 with respect to all user contributions, under the Copyright Act, 17 U.S.C. § 101. 43. Because all user-generated submissions are screened (and sometimes altered) by Ripoff Report’s content monitors before they are posted to the ROR Website, and because copyrighted works are “created” when they are first fixed in any method that is sufficiently stable that they can be perceived, reproduced or communicated, under the definitions of the Copyright Act, 17 U.S.C. § 101, Ripoff Report has already acquired exclusive copyright ownership of all user-submitted content before it is published to the Web.

In “Definitions” of the Copyright Act, a “transfer of copyright ownership”

is defined as “an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license.” U.S.C. § 101.
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4

44.

Websites Facebook,4 Craigslist,5 Roommates.com6 and most

standard community websites only require users to agree to grant a non-exclusive license for user content. By contrast, Ripoff Report owns the perpetual, exclusive, worldwide copyright in and to every single item of content any user has contributed to the ROR Website, even before it is posted to the Web. 45. Moreover, unlike community forums such as Facebook or Craigslist, Ripoff Report embeds links into the contents of user-submitted material for paid advertisements for sometimes unrelated advertisers like “Cash4Gold.” C. ROR Website’s Rebuttal and Commenting System 46. Ripoff Report does not allow users to post positive Reports about a

business or individual on the ROR Website. Ripoff Report’s content monitors review Reports before they are posted to filter out those that say positive things about a business.

“you grant us a non-exclusive, transferable, sublicensable, royalty-free,

worldwide license to use any IP content that you post . . . This IP License ends when you delete your IP content or your account . . .” (Facebook Statement of Rights and Responsibilities Last Revision April 22, 2010)
5

“you automatically grant . . . to craigslist an irrevocable, perpetual, non-

exclusive, fully paid, worldwide license to use, copy, perform, display and distribute said Content. . .” (Craigslist Terms of Service, July 24, 2010)
6

“with respect to Content you submit . . . you grant us the following world-

wide, royalty-free and non-exclusive license(s) . . . the license to use, distribute, reproduce, modify, adapt, publicly perform and publicly display such Content . . . “ (Roommates.com Terms of Service as of July 24, 2010)
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47.

Instead, Ripoff Reports restricts subjects wishing to defend

themselves or others identified in a Report to placing such comments in a “rebuttal” or as a “comment” to a Rip-off Report. 48. Rebuttals and comments are placed in a less prominent position than the Reports. They are in smaller type, and lower down the screen, than the headers and main body of Rip-off Reports. 49. Ripoff Report also has designed the ROR Website with various technical restrictions that make it much more difficult to reproduce, memorialize or share the rebuttal and comment sections purportedly attached to the Reports. 50. Attempts to print a Rip-off Report directly from a standard web browser such as Firefox will only print the negative Rip-off Report and sidebar advertising, and will not print the purportedly associated rebuttals and comments. D. Ripoff Report’s Commercial Goods and Services 51. Ripoff Report is a business. In addition to being in the business of

attracting visitors to the ROR Website and advertising against the resulting visitor traffic analytics, selling paid advertising links and banner and sidebar advertisements, Ripoff Report directly vends goods and services in interstate commerce through the wires by means of, inter alia, the ROR Website and emails. 52. Among the goods Ripoff Report sells is a book, pamphlet or guide called the “Rip-Off Report.com Do-It-Yourself Guide: How to Get Rip-off Revenge.” This book is offered for sale in the United States for $21.95. 53. Purchasing this book is actually “Step Two” in following the ROR Website’s “How to Get Rip-Off Revenge” instructions. Step One is to file a detailed Rip-Off Report at the ROR Website. 54. At all times relevant herein, and since at least 2005, Ripoff Report has offered and offers for sale, through the ROR Website and through emails in

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interstate commerce a program called the “Corporate Advocacy Program” (sometimes herein, “CAP”). 55. Defendants describe CAP as “where a business may publicize its proactive approach to addressing . . . complaints.” Defendants insist that “all businesses will get complaints, but how those businesses handle those complaints separates good business from bad business.” Defendants advertise to the public that that CAP “demonstrate[es] yours is an honest business, with integrity, and willing to make a commitment to righting consumer wrongs.” 56. In or around April 2010, Defendants also introduced the “Ripoff Report Verified Safe” program. Defendants advertise, with reference to CAP, “This program now includes – Ripoff Report Verified.” 57. The ROR Website depicts a logo for the Ripoff Report Verified Safe program comprising a stylized figure of a person wearing a necktie with a halo floating above, and a checkmark in a box, together with the tagline “businesses you can trust!” 58. Defendants advertise that this Verified Safe Program “also includes a commitment to Ripoff Report Corporate Advocacy Business Remediation and Customer Satisfaction Program,” which is CAP. Defendants advertise CAP as “a program that benefits the consumer, assures them of complete satisfaction and confidence when doing business with a member business.” 59. The web page on the ROR Website dedicated to the “Ripoff Report Verified Safe” program represents, in hyperlinked text, that “Advertisers have met our strict standards for business conduct. Clicking on that hyperlinked text directs the viewer to another web page located at the URL http://www.ripoffreport.com/ConsumersSayThankYou/AdvertisingStandards.aspx and titled “About Us: Advertising Standards.” 60. On the “About Us: Advertising Standards” web page of the ROR Website, Defendants state that they ensure an advertiser is “Scam-free and has no

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outstanding reports filed against them.” This implies that having “outstanding Reports” on the ROR Website means a business cannot be trusted. E. Ripoff Report’s Relationship with Search Engines and HTML 61. In order to truly understand the nature of the harm and destruction

wrought by Defendants, it is critical to recognize the importance of search technology in the modern use of the Internet. 62. Search is currently the most powerful, vibrant determinant in the way people use the Internet today. The global search advertising market was a reported $6.2 Billion in the second quarter of 2010.7 Google, which reported a total market capitalization of $36 Billion in 2009, rose to prominence by making the Internet searchable. 63. Courts have long recognized the importance of search as a means for users to locate information or consume content of interest on the Web. In 2000, the Court in Bihari v. Gross, 119 F. Supp. 2d 309, 312 (S.D.N.Y. 2000) wrote of search: “Because entering the company's name as the domain name often fails to take the user to the desired webpage, many users prefer the . . . search technique. Here, a websurfer enters a particular company name or search request in a search engine. The search engine then displays a list of websites that match the user's request. The search engine ranks the relevant sites according to the relative frequency with which the word or phrase appears in

Source: Investor Business Times, “Google search share slips, Baidu gains: report” (July 23, 2010).

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the metatags and in the text of the websites. The websurfer then chooses, based on any number of considerations, which website to visit.” Bihari v. Gross, 119 F. Supp. 2d 309, 312 (S.D.N.Y. 2000). 64. Many members of the public influenced by a Rip-off Report do not locate it by navigating to the ROR Website by domain name -- ripoffreport.com -and then searching the ROR Website for a company or a person. 65. Instead, many -- if not most -- discover Rip-off Reports by searching for that company or person on the Web generally, by entering the name of that company or a person as a query in a search engine such as Google and then viewing the web pages returned in response to the search query. 66. The public often does not type in unique web addresses or "URLs” into address bars in their browsers. Instead, it is much more convenient and often faster to type in a query to the search pane of a browser or enter a search query into one of the major search engines: Google.com, Yahoo.com, or Bing.com. See Declaration of Joe Reed, attached as Exhibit “2” and Declaration of Anthony Howard attached as Exhibit “3.” 67. Defendants’ conduct herein encompasses their affirmative activity directed at search engines through the HTML which they cause to be designed, written, generated and published for each unique web page comprising the ROR Website. Thus, the Ripoff Report enterprise communicates with the public by shaping the HTML and Report texts in ways that it knows will influence search results to appear in certain, predictable ways. 68. HTML is the language of expression for individual web pages that are published to the web. The ROR Website comprises an estimated over 500,000 unique web pages, by Defendants’ admission. 69. HTML determines not only how a web page is formatted to a viewer, but also influences how a page is located and displayed in response to a search engine query. Among other things, a web page’s HTML influences (1) the order in which a search engine query returns and displays results for a particular web page
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(“page rank”) and (2) how the description of the web page returned by the search query appears (“search result”). 70. It is well-recognized that a party can be held liable for damages proximately caused by writing or causing computer software, computer code, or HTML to the extent it influences the public through a search engine. 71. Courts have long held parties accountable for their deliberate conduct expressed in HTML and aimed at the intermediate space between the front, or user-facing, side of a Website, and the “back end” of a website. 72. Courts regularly enjoin parties to refrain from infringing trademarks through inserting infringing terms in the description and keyword metatags of HTML, and find such inclusion of infringing terms in metatags to be actionable infringement, even where the HTML is not immediately visible to the viewer. See, e.g., Brookfield Communs. v. W. Coast Entm't Corp., 174 F.3d 1036, 1065 (9th Cir. Cal. 1999). 73. Courts have also recognized that computer code can qualify as “speech,” inasmuch as it is readable by humans and computer programmers “communicating ideas to one another almost inevitably communicate in code, much as musicians use notes.” Universal City Studios v. Corley, 273 F.3d 429, 448 (2d Cir. 2001). 74. Thus, Courts have long recognized the power and impression of search results on a user surfing the Web, and held parties accountable for what they write in HTML. 75. 76. The business model of commercial search engine companies such as The underlying business model of such search engine companies is Google, Yahoo and Microsoft’s Bing is an advertiser-supported one. the delivery of online advertising to as many users as possible. Websites that have more visitors create greater opportunities for a search engine company to deliver online advertisements.

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77.

A typical search engine user begins by entering a query, or

“keywords” into a field in the search engine’s website or perhaps in Web browser bar. After a user enters keywords or terms as a search query in a search engine, blocks of text are yielded, known as “search results,” comprising the link to the web page and snippets of content associated with the web page. The order of prominence in which the search results appear are known as “page rank” or "page rankings." 78. Google operates an Internet search engine, which allows Internet users to locate Web sites that match the “keywords” or search terms they enter. A search engine uses algorithms to process the keywords and produce a “search results” page that displays links to the Web sites in the search engine’s database that match the keywords. Links to the Web sites usually are displayed in order of decreasing relevance, with the most relevant Web sites listed first. Google’s free search engine processes hundred of millions of searches daily and covers billions of Web pages. See, e.g., Google Inc. v. Am. Blind & Wallpaper Factory, Inc., 74 U.S.P.Q. 2d 1385 (N.D. Cal. 2005) at *6. 79. A person searches for a business or person by typing the business or person as a query into a search engine such as Google, Yahoo, or Bing. She views the pages of results returned by her search query, in decreasing order of “relevance” as determined by the search engine’s proprietary algorithms. 80. What she sees is a powerful first impression of the subject of her search query. Both the "search results" and "page rankings" are important determinants for a user filtering the total amount of information available to the public through Internet research. 81. An entire business of "search engine optimization" or “SEO” has developed around the critical importance of these factors. Search engine optimization concentrates on “organic” or “algorithmic” search results -- that is, natural, unpaid, search results and page rankings (as opposed to “Sponsored

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8

Results” that appear on the side of the main search results page and which are influenced by the purchase of keywords). See Howard Declaration,. 82. Search engine optimization has been described as the business of “help[ing] companies rank high on Internet search engines, such as Google, for certain keywords, so that their prospective customers can find them on the web.” See, e.g., Rhino Sports, Inc. v. Sport Court, Inc., 2007 U.S. Dist. LEXIS 32970 (D. Ariz. May 3, 2007) at *7. 83. The size of the market for SEO services provided to companies seeking to attract customers to their websites through optimizing content on the Web about them for search engines such as Google, Bing or Yahoo was, in 2009, a reported $14.6 billion.8 84. Courts have long recognized the importance of this first impression in the context of “initial interest confusion” in trademark cases, whereby “the defendant, by diverting or capturing the consumer’s initial attention, improperly benefits from the goodwill that the plaintiff developed in its mark.” 85. In this case, the Defendants improperly assassinate the goodwill of the subject in search results. They do not do this solely for altruistic reasons. They do this for their own direct pecuniary gain, either (1) in the form of sales of goods and services, or (2) in the form of increased Web traffic to its ROR Website, which drives up the statistics in web analytics that partially determines the amount of advertising revenue they receive from online advertisements. It is a win-win situation for Defendants. 86. Thus, Defendants’ conduct herein must be viewed not only in terms of what is displayed on the ROR Website itself, but also in terms of what Defendants cause to be published in the “HTML” for each web page on the ROR Website in view of the economics of advertiser-supported search engine business models.
Source: Crain’s Cleveland Business, “Search Engine Adviser’s Growth Easy to

Fathom.” (July 23, 2010).
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87. content. 88.

By the time any content is published to the Web through the ROR

Website, Defendants have already acquired an exclusive, perpetual license to the Defendants are the owners of all Reports, rebuttals and comments by Defendant fills the content with paid

the time anyone ever reads them.

advertisements, links and sometimes paid endorsements or testimonials. Speech on the ROR Website is thus commercial speech, and accorded a lower level of protection under the First Amendment than purely expressive speech. 89. The HTML influences such things as the URL for the web page, how prominently ROR Website web pages rank in search query results and which information about Rip-off Report subjects appears in actual search results. 90. Defendants have taken many affirmative, deliberate actions in designing and controlling the process by which HTML is generated for the over 500,000 unique web pages comprising the ROR Website that are deliberately intended to improve the organic search results for web pages containing Rip-off Reports when the subject’s name is search queried. 91. In particular, Defendants have been successful in maintaining favorable page ranking, or “authority” from Google for the over 500,000 web pages comprising the ROR Website. F. Ripoff Report’s Authority with Google and Preference for Google 92. 93. The ROR Website has been on the Internet since 1998. Google is by far the most popular search engine for Web searches. In

July 2010, an estimated 69.7% of users use Google as a search engine, an estimated 5.4% use Yahoo, and an estimated 4.8% use Microsoft’s Bing. 94. Some professional SEO consultants have openly speculated that search engines Yahoo and Bing have changed their search algorithms to “punish” or downgrade Ripoff Report within their organic search results, based on the
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observation that search queries conducted through Yahoo or Bing for a company or individual will ordinarily return search results that rank web pages from the ROR Website containing or referring to that company or individual relatively low. 95. However, Google’s search algorithms continue to give high “authority” to web pages from the ROR Website. Having high “authority” means a website’s individual web pages rank consistently highly in search query page rankings. 96. Search queries conducted through Google for a company or individual will ordinarily consistently return search results that rank web pages from the ROR Website containing Rip-off Reports about that company or individual (the “subject”) relatively highly, if any such Rip-off Reports exist. 97. For a small business or individual that has not deliberately engaged in any SEO activities, if there is a Rip-off Report about that subject, a Google search for that business or individual will frequently return search results that rank the web page containing the Rip-off Report about that subject on the top page of Google search results, if not as the first page rank. G. Defendants’ Use of Domain Names To Influence Google Page Rankings 98. to it. 99. Defendants are responsible for the operating system, website design, and user interface of the ROR Website. As designed, maintained and operated by Defendants, the user interface of the ROR Website generates a unique URL for each web page associated with each of the over 500,000 Rip-off Reports hosted through the ROR Website. 100. A ROR Website user cannot actually choose a URL to assign to the web page associated with a Rip-off Report. Defendants own and control all
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One of the factors that influence a particular web page’s ranking in

responses to Google search engine queries is the domain name and URL assigned

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domains and sub-directories that direct through the ROR Website located at ripoffreport.com. Only Defendants can create a web page with a URL that begins with the domain name “http://www.ripoffreport.com/ . . . “ 101. Ripoff Report designs and operates its user interface and website operating system in a manner that it creates a unique URL for every ROR Website web page that includes in the URL itself, the name of the subject of the Report, sometimes repetitively. 102. This inclusion of the subject’s personal or business name in the unique URL for a Report, always combined with the “ripoffreport.com” domain names for Rip-off Report web pages influences Google’s search engine to give higher page rankings to Reports than web pages located at URLs that do not include such business or personal names in the URL. 103. For example, in Rip-off Report number 621543, a Report about a company called “JobsforMoms.com” with the headline “JobsforMoms.com take our money and run Internet” generates the domain name http://www.ripoffreport.com/work-at-home/jobsformoms-com/jobsformoms-comtake-our-mone-8e566.htm. This URL visibly incorporates the words “ripoff,” "ripoffreport," "work," "work at home," "home," "jobsformoms", and "jobsformoms.com" and would result in a higher page ranking for the web page hosting Report 621543 in search queries for those words than a web page located at a URL that did not include those words in the URL itself. 104. The Ripoff Report enterprise designs and operate their website operating system, directories and subdirectories to generate unique URLs for individual ROR Website web pages that include the names of companies or individuals written about in the Reports. These URLs are created, controlled by and owned by Defendants thus influence search engines to return higher page rankings for ROR Website web pages displaying Rip-Off Reports about the subject companies or individuals than other web pages that may mention the same

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company or individual but do not include the company or individual’s name in the domain name. 105. Another place the Ripoff Report enterprise optimizes the Reports for search engines are in the headlines. The “headlines” for many Rip-off Reports are not written in standard English with ordinary grammar and syntax. In many instances, they read like nonsense or gibberish. Such “headlines” frequently include redundant, repetitive instances of a company or individual’s name. 106. For example, Defendants published to the Web on or about January 28, 2009 Rip-off Report number 417493 concerning Plaintiffs. A true and correct reproduction of relevant portions of Report number 417493 and screen shot showing the URL in the browser bar is reproduced below. 107. At all times relevant herein, Report number 417493 included text near the top that repeats the name of Plaintiff Asia Economic Institute twice and also

includes the acronym “AEI.”

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“Asia Economic Institute, AEI, WorldEcon: Raymond Mobrez And Iliana Llaneras Complete exploitation as an employee. Do not work for the Asia Economic Institute its a SCAM! West Los Angeles California.” 108. The URL for the web page on the ROR Website that displays Report number 417493 is currently http://www.ripoffreport.com/employers/asiaeconomic-instit/asia-economic-institute-aei-ef3f4.htm. This mirrors the double inclusion of Plaintiff Asia Economic Institute’s name and the inclusion of the acronym “AEI” that is also in the header. 109. The Ripoff Report enterprise changed the URL for Report 417493 at some time between the date it was originally published and the present. In or about January 2009, the URL for Report 417493 did not include so many repetitive instances of Plaintiffs’ names. The Ripoff Report enterprise has since “optimized” it for search engines. 110. Defendants updated Report number 417493 on or about May 21, 2010 at 3:30 p.m. Pacific Standard Time. Defendants continuously publish Report number 417493 to the Web. 111. At some time between January 28, 2009 and the present, Defendants caused the terms “Asia Economic Institute” to be repeated in the header of Report number 417493 and in URL for the web page displaying Report number 417493 to attract search engines to the web page of the Report for search queries for “Asia Economic Institute” and to influence the search engines to rank the web page more highly, rather than to express an idea to a reader that has already navigated to the page displaying Report number 417493. 112. Many businesses and individuals of ordinary sophistication have not purchased domain names consisting of their business or personal names. Many, if not most, businesses and individuals or ordinary sophistication do not host content at URLs or domain names that include their business or personal names.

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G.

Defendants’ Preferential Treatment of Google and Founders in Reports 113. Ripoff Report actively and deliberately encourages users to prefer

Google as a search engine above others, invoking Google frequently by name. Various portions of the ROR Website and form emails sent by Defendants on May 12, 2009 to Plaintiff Raymond Mobrez state, “Why do we win? – just do a Google search for Communications Decency Act” or suggests recipients of emails to “Google” for advertisers to demonstrate the validity of various propositions. 114. Ripoff Report also strongly protests on the ROR Website that it does nothing to earn special, favorable treatment from Google. 115. As early as June 26, 2009, Defendants stated on their website: “Why would a multi-billion dollar company like Google give preferential treatment to a relatively small, controversial site like Ripoff Report? IT WOULDN'T, PEOPLE! . . . Ripoff Report has never, ever (not now, and not in the past) done anything to cause Google to rank our website higher in search results than other sites.” Plaintiffs viewed such statements on June 26, 2009 and October 27, 2009. 116. Despite this protest, Defendants changed significantly the content of Report numbers 607436, 517026 and 144627 in a manner that makes the Reports more favorable to Google and its founders, Sergey Brin and Larry Evans. 117. Report number 607436 is a complaint about the Google Adwords program. The purportedly user-submitted Report by “Chris” of Atascadero, California, bears the headline beginning “Google Adwords Waste of Time Internet” and states that the user’s ad performed much better on Yahoo. 118. On or about May 31, 2010 at 9:31 a.m. Pacific Standard Time Defendants inserted in type of equal prominence on Report 607436, and transmitted through the wires in interstate commerce through the ROR Website the following false statement: “NOTICE..!! this ripoff has nothing to do with Google search engine – many rip-off businesses use the Google name to fool consumers.”
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119. The “Notice” on Report number 607436 transmitted by Defendants is false on its face. The true facts are that AdWords is a program operated and owned by Google, the same company as Google search engine. Google Adwords is sold at http://google.com/ads/adwords2 and the Google search engine is located at http://google.com. Both reside under the same top-level domain name, google.com 120. A true and correct copy of relevant sections of Rip-off Report Number 607436 is reproduced herein.

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121. Defendants also placed a false “*Notice” in between the title and header of Rip-off Report Number 517026. A true and correct copy of relevant portions of Rip-off Report Number 517026 is reproduced below:

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122. Report number 51706 is a complaint about the Google Adwords program. The Report is dated Thursday, October 29, 2009 and indicates the last posting was October 30, 2009. The purportedly user-submitted Report number 517026 by “Robert” of Painesville, bears a headline including “google Adwords advertising ripped me off on sponsored search advertising Internet” and states that “anyone thinking of trying Google adwords sponsored search advertising don’t Do It.” 123. On or about October 30, 2009, at 4:26 p.m. Pacific Standard Time, Defendants inserted in Report number 517026 and transmitted through the wires in interstate commerce through the ROR Website, the following false statement, in bold type of much larger point size than the body of the Report consisting of the following “Notice”:
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“NOTICE..!! this ripoff has nothing to do with Google search engine – many rip-off businesses use the Google name to fool consumers.” 124. The “Notice” added by Defendants on Report number 517206 is false on its face. 125. The true facts are that Google does offer a keyword-triggered advertising program called “AdWords.” See Google Inc. v. Am. Blind & Wallpaper Factory, Inc., 2005 U.S. Dist. LEXIS 6228 (D. Cal. 2005) at *6. 126. Plaintiffs are informed and believe and thereon allege that Defendants changed the names in Report number 144627 from “Sergey Brin” to “Soney Bonoi.” 127. Defendant Magedson admitted that he suppressed or changed the names in Rip-off Reports about Google Co-founder Sergey Brin because Google is a company that Ripoff Report does business with and Magedson “was personally told that [a user was] going to file phony reports about Google, anybody that [the user] could find out that I was doing business with.” 128. Defendant Magedson admits that Sergey Brin is not a member of the Corporate Advocacy Program. Therefore, Defendants added the additional material in Report number 607436 and changed the names in Reports. 129. The true facts are that Ripoff Report does many things in creating, formatting and publishing the web pages and associated HTML of content it publishes to the Web that optimize its ranking with search engines, particularly Google, and that influence the way search results appear. /// /// /// /// /// ///

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H.

Defendants Alter Google Search Results for CAP Members 130. Defendants misrepresent their SEO efforts in part to appear authentic

to the public and add credibility to the Reports. The Ripoff Report enterprise then offers certain ways that a subject can change or contribute to his or her own Report. One is by joining CAP. 131. There are at least two ways to become a member of Defendants’ Corporate Advocacy Program. The first, “official” way is to engage in Defendants’ elaborate CAP application process. 132. Following the “official” method of enrolling for CAP, the potential applicant jumps through various procedural hoops, makes various written factual admissions, agrees to jurisdiction in Maricopa County, Arizona and eventually compromises and waives substantive legal rights, including all claims against Defendants. 133. The first step is to complete an intake questionnaire included on the ROR Website, a sample of which is attached hereto as Exhibit “4” as it appeared on July 26, 2010, and which is in substantially the same or same form as presented by the Ripoff Report Enterprise to Plaintiffs at all relevant times herein (“First Questionnaire”). 134. The First Questionnaire informs applicants that the program “requires accepting responsibility for past problems and a commitment to making things better.” It asks applicants, “Will you be willing to accept responsibility for mistakes made?” 135. On information and belief, Plaintiffs allege that a CAP applicant must answer this question in the affirmative, as well as describe information such as the average dollar amount of its sale, to continue in the application process. Attached hereto as Exhibit “5” are true and correct copies of electronic mails between one such prospective CAP applicant, Tina Norris (“Norris”) and Magedson, including those sent on March 9, 2010 at 8:23 p.m., May 20, 2010 at 7:55 a.m., and May 20,
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2010 at 10:31 a.m. On March 2, 2010, Norris filled in and submitted the information requested by the Ripoff Report enterprise as responses to the First Questionnaire through the ROR Website. 136. After receiving responses to the First Questionnaire, Defendants send interested CAP applicants an email that advises applicants, inter alia, that they have the option of filing a free rebuttal to any Rip-off Reports about them on the ROR Website. Prospective CAP members receive an email from Defendants that instructs them to copy and paste into a return email to Defendants the following text: “Dear Rip-off Report, I understand I could file rebuttals to the one or small hand full of reports I have. I would still like to understand the program that Rip-off Report has created to try and help businesses gain consumer trust, whether or not the reports are true or false. I realize, with or without Rip-off Report we would get complaints somewhere. I have already filled out the form which is below for your review. Please send me the RATES and whatever information you think I need to know about the benefits of joining Rip-off Report Corporate Advocacy Program.” On March 9, 2010 at 8:23 p.m., Magedson sent Norris an email with the abovedescribed instructions and requesting the above-described acknowledgement (Exhibit “3”). 137. On May 20, 2010 at 7:55 a.m., Norris cut and pasted the requested text into an email and emailed that reply back to Magedson, as requested in Magdson’s March 9, 2010 email to Norris (Exhibit 3). 138. Thereafter, Defendants send prospective CAP applicants an email with the subject “Corporate Advocacy Intake Form” with several attachments. The attachments include (1) a document entitled “Corporate Advocacy Program Description and Rates,” which contains more details about CAP, some additional terms and conditions of CAP, some of the benefits of CAP, and a rate sheet setting

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forth the fees for CAP (“CAP Rate Sheet”), (2) a document entitled “Sample letter we send to anyone that filed “a Ripoff Report.” 139. A true and correct copy of an actual “Corporate Advocacy Program Description and Rates” and covering email that was sent from Defendant Magedson to Tina Norris (“Norris”) on May 20, 2010 at 10:31 a.m. Central Standard Time with the subject line “Corporate Advocacy Intake = TNT MGMT, Tina Norris – 11 Reports? Our philosophy – the RATES” is attached hereto as Exhibit “6” at pages 6 to 10 and incorporated herein by this reference. 140. A true and correct copy of the attachment to the May 20, 2010 10:31 a.m. email from Magedson to Norris consisting of solely the “Corporate Advocacy Program Description and Rates” document is attached hereto as Exhibit “7.” The first page of that document written and sent by the Ripoff Report enterprise states: “NOTICE: Jurisdiction for this program is in Arizona, under the laws and the state of Arizona. Doing this program, both parties agree they will have no claims against each other, and jurisdiction for any disputes is in Arizona, Maricopa County.” Exhibit “7” 141. The cost of joining CAP is revealed in the Rate Sheet, entitled “Costs for the Cap Program - $$$$.” A true and correct copy of the Rate Sheet portion of the Corporate Advocacy Program Description and Rates emailed to Tina Norris by Defendant Magedson on May 20, 2010 at 10:31 a.m. Central Standard Time is attached hereto as Exhibit “8.” 142. The cost of joining the CAP program has two components, (1) an initial charge, consisting of a “Programming” charge plus a flat fee based on the number of reports existing at the time of joining the program, and (2) a mandatory, 36-month contract requiring “Monthly Monitoring Fee” payments of between by the third of the month. 143. To join CAP, an applicant with 1 to 350 Reports must pay the initial Programming charge is $7,500, plus a flat fee of between $600 to $140,000, plus a
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36-month contract to pay between $35 to $7,000 per month, depending on the total number of Reports at the time of joining. 144. To join CAP, an applicants with 351 to 500 Reports must pay the initial Programming charge is $8,500, plus a flat fee of between $122,850 to $175,000, plus a 36-month contract to pay between $5,265 to $7,500 per month, depending on the total number of Reports at the time of joining. 145. To join CAP, an applicant with 501 to 1000 Reports must pay the initial Programming charge is $15,500, plus a flat fee of between $122,850 to $175,000, plus a 36-month contract to pay between $7,515 to $15,000 per month, depending on the total number of Reports at the time of joining.. 146. To join CAP, an applicant with 1001 to 1500 Reports must pay the initial Programming charge is $20,500 plus a flat fee of between $250,250 to $375,000, plus a 36-month contract to pay between $10,010 to $15,000 per month, depending on the total number of Reports at the time of joining. 147. If the applicant is more than 10 days late in paying a monthly monitoring fee, a $50.00 late fee per day is assessed, which is incorporated into the member’s currently, monthly fee. 148. Thereafter, another step that an applicant to CAP must take is to provide more detailed information about its business to Defendants in the form of a second questionnaire (“Second Questionnaire”). A true and correct copy of an example of Defendants’ Second Questionnaire is attached hereto as Exhibit “9.” 149. The Second Questionnaire purports to be “Questions for the Agreement” that Defendants will prepare based on the CAP applicant’s answers. 150. The email accompanying the Second Questionnaire explains that a few days after successful completion of the Second Questionnaire, Defendants will send an agreement for the CAP member’s signature (“CAP Agreement”). 151. Defendants represent that upon return of a signed CAP Agreement with payment, Defendants will send the CAP member, inter alia, a “TEXT outline so you can give us your proposed comments you would like us to use to talk about
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your company, explaining changes your company has made . . . and other positive comments about your company.” 152. Defendants also promise that upon joining the CAP program (by returning the signed CAP agreement with payment, Defendants will, inter alia, send the CAP member “the 250 to 350 words you want us to put in front of the Reports found on search engines.” Finally, The Ripoff Report enterprise gives as an example, a Google search query “like this

one…http://www.google.com/search?hl=en&q=Blue+Coast+Financial&aq=f&aqi =g8g-m1&aql=&gs_rfai=” 153. This Google search query for “Blue Coast Financial” yielded, as of July 25, 2010, search results as reproduced in the screenshot below:

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154. As promised, joining CAP has turned the “negative” into a positive in Google search results. The web page for Rip-off Report number 412338 still remains in a high-ranking position three in page rank for a Google search query for “Blue Coast Financial.” However, the viewer of the Google search query results sees only the following preview snippets of text for the web page displaying Ripoff Report Number 412338: “Blue Coast Financial Review | Rip-off Report #412338 Apr 9, 2010 ... INVESTIGATION: Shawn Hull, Blue Coast Financial Commitment to 100% client satisfaction, Feel confident and secure when doing business with ... www.ripoffreport.com/.../Blue-Coast-Financial/investigation-shawn-hullblu-cc86w.htm - Cached - Similar” 155. The reason this happens is that after a subject joins the CAP program,

15

the negative content in the Rip-off Report about the subject may not be removed,
16

but the negative comments are pushed so far down the “content” attribute of the
17

“head” section of the HTML code for the web page displaying the Report that the
18

negative content becomes virtually irrelevant to the search engines because of the
19

overwhelming “good” content placed in the first 90% of the metatag.
20

156.
21

An example is shown below, for Ripoff Report’s advertiser,

Cash4Gold:
22 23 24 25 26 27 28

<meta name="keywords" content="rip-off, ripoff, rip off, Cash4Gold, Corrupt Companies" /><meta name="description" content="INVESTIGATION: Cash4Gold customers can feel safe confident & secure when doing business Cash4Gold & Albar Precious Metal Refining – Commitment to total customer satisfaction, positive rating for its customer support. Consumers best bet when looking to get Cash for Gold.*UPDATE ...Rip-off Report Investigation: Cash4Gold pledges to resolve complaints. Commitment to Rip-off Report Corporate
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Advocacy Program.- Executives stated "We are only as strong as our weakest link running a company of this size & volume you must adapt to your customers needs" Over $350,000 spent on new state of the art tracking systems " /></head> 157. In the above example, the new, custom “content” is shown after the “content=” attribute inside the second set of meta “angle brackets” (between the “<meta” and the “/>”. Although the previous negative part of the actual Report may not be physically removed, it is effectively removed for search results because of the change in meta tags and overwhelming page modification with positive comments. 158. The actual Rip-off Report used as an example in the Second Questionnaire Email, Report number 412338, appears to have been replaced by a retraction from the original poster as of July 25, 2010. A true and correct copy of Report Number 412338 as it appeared on July 25, 2010 currently is attached hereto as Exhibit “10.” 159. Report Number 412338 provides in part: “Dear Editor: Please publish the following post: I would like to retract my original post. I was completely wrong for posting what I did about Blue Coast Financial. After my post rip off report investigated the company and that made me think about what I was actually doing. I would like to apologize to the company and staff that tried to help me make this business successful.” Exhibit 10. The “original post” referred to in Report 412338 is not visible. 160. Thus, the Ripoff Report enterprise promises, perhaps tacitly, that membership in CAP will get the CAP member favorable, prominent search results, and points the CAP applicant to an example where the original Report has obviously been replaced. The only thing that appears to remain the same is the number.
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161. A second, “unofficial” way to get into CAP is to file a lawsuit against Defendants. 162. The Ripoff Report enterprise makes many representations of fact to the public and to victims in furtherance of the Content Trolling Scheme. 163. Among Defendants’ most striking false representations, both on the ROR Website on both June 26, 2009 and October 27, 2009, and in emails to individuals seeking information about Rip-off Reports, is that “WE DO NOT Remove any Rip-off Reports” and never removes reports for money. 164. ROR falsely claims that it never takes down reports, whether for money or even if you sue, including currently on the Ripoff Report Website “Ripoff Report . . . will not remove complaints even if you sue.” This quotation appeared on the Website on June 26, 2009 and October 27, 2009. Plaintiffs viewed the page containing this statement on those dates, and relied thereon. 165. This is absolutely false. Ripoff Report has taken down at least two reports after litigation, and for a sum of over $100,000, in October 2009 and December 2009. 166. The true facts are that Ripoff Report has removed Rip-off Reports, and for substantial amounts of money. For substantial amounts of money, Rip-off Report will disclaim Rip-off Reports, has permitted the subjects of Rip-off Reports to write large portions of the contents, and has taken down Rip-off Reports. 167. A settlement agreement dated May 15, 2009 entered into and signed by Defendants Xcentric and Magedson, on the one hand, and QED Media Group, LLC, and Robert Russo, the subject of certain Rip-off Reports, on the other hand (the “QED Agreement”) attached hereto as Exhibit “11”, provides in part: a. b. “QED will pay to Xcentric the sum of Eleven Thousand dollars ($11,000) in the form of a cashier’s check; . . . QED will execute a promissory note [to Xcentric] for the principal sum of Ninety Thousand Dollars ($90,000) . . .

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d.

Xcentric will insert into the beginning of the body of Report number 311070, Report number 254798, and Report number 261756 up to 250 words of content provided by QED.”

Exhibit 11. 168. Defendants induce subjects of negative reports, including Plaintiffs, to take steps that effectively aggravate their injuries rather than helping them, by posting rebuttals, while deterring them from exercising their rights by misleading them as to Defendants’ track record of success in the courts. 169. ROR tells the subjects of its reports that they can tell their side of the story if they file a “rebuttal.” 170. However, not all rebuttals are posted. Moreover, what ROR does not tell subjects of reports is that filing a rebuttal is likely to increase the prominence of the negative statements, and does so in a way that only the negative appears in search results, not the positive. See Exhibit 2. 171. ROR also does not tell subjects that filing a rebuttal is financially helpful to ROR because it increase the visitor traffic, amount of fresh content and strengthens the overall authority of the site. 172. ROR also does not tell those to whom it advocates filing a rebuttal that ROR then sells advertising links from the rebuttals. Thus, ROR is the ultimate “troll” – a website that baits innocent people into defending themselves, and then advertising against the fresh content contained in their rebuttals. 173. Furthermore, ROR claims that you can always file a free rebuttal. This is false. Many rebuttals do not get posted, thus depriving subjects of the ability to tell their side of the story and aggravating the harm to their reputation on the Internet with devastating consequence to their business and personal lives. Moreover, the claim that anyone can file a free rebuttal leads the public to infer that the subject does not have a response. 174. Ripoff Report presents CAP and its Verified Safe program as endorsements that a consumer can trust. This violates Section 5 of the FTC ACT, 15 U.S.C. § 45, and the Codes of Federal Regulations promulgated there under, 16
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C.F.R. Part 255.0 et seq. because Defendants fail to make material disclosures that would affect consumer’s perception of Defendant’s endorsement of such programs as paid advertisements and are not neutral and objective. 175. Finally, ROR claims that it has not done anything to get more favorable search results with Google. Yet, ROR has altered content concerning Google to maintain its good favor. 176. Desperate, the subjects of Reports are overwhelmed in the aftermath of having a report go up about them. 177. The distress of a subject is well known among a business sector of consultants who purport to have knowledge as to how to address the existence of a Report. 178. Victims are deluged with calls, e-mails and faxes from services soliciting fees to “repair” online reputation caused by the ROR. 179. Defendants intentionally used their Web site as a scheme to attempt to obtain money from advertisers, Plaintiff and others by means of (1) the negative Google search results generated from Rip-Off Reports and (2) false and defamatory content acquired and distributed by Defendants. 180. Promising media attention and monetary compensation via class action lawsuits, Defendants solicit purely negative content about businesses and individuals and guide the creation of these complaints with their “Ripoff Revenge” guidebook. In fact, the “Rip-off Report Do-It-Yourself Guide to Rip-off Revenge” offers “step by step instructions” to readers looking to redress their grievances. 181. Defendants then label these businesses or individuals a “Ripoff” and preclude publication of positive Reports. 182. This biased presentation of these targets appears in Google search results and are typically visible on the first page of the results page. 183. Using the pseudonym “Corporate Advocacy Program” (“CAP”), Defendants charge as much as $7,500 to replace the negative search results with positive affirmations. In addition, CAP members must pay a fee based on the
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number of reports and a monthly monitoring fee per report times the reports originally filed. The monthly monitoring fee agreement is for a minimum term of 36 months. V. DEFENDANTS’ VIOLATIONS OF 18 U.S.C. § 1343 (Wire Fraud)

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

A.

Defendants Falsely Represent That “Reports Never Come Down” 184. Defendants make several, false and fraudulent statements of fact on its

Web site and in e-mails sent by Defendant Edward Magedson to Plaintiffs and others similarly situated in a concerted effort to collect revenue from the sale of their “Ripoff Revenge” guidebook, sale of their Corporate Advocacy Program, advertisements, Internet traffic and link referrals. 185. These misrepresentations were made with the specific intent of: (1) deceiving the public as to the legitimacy of their purported “consumer advocacy” site; (2) deceiving the public as to the impartiality of their Rip-off Reports; (3) deceiving the public as to safety of those businesses and individuals endorsed via CAP; (4) deceiving the targets of the Ripoff Report enterprise into believing the free rebuttal will be effective and helpful; and (5) deceiving the targets into believing that legal action is futile because it cannot accomplish the goal of removing Reports from Defendants’ database or the ROR Website, and that the only way to remedy the harmful effects of Defendants’ Web site is through payment to information technology consultants or the Defendants themselves. 186. Defendants mislead those victimized on their website when they state both on the site and in emails they “never take reports down.” come down” or “reports always stay up.” They have expressed this false statement in a number of ways, also stating that “reports never

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187. At all times relevant hereto, Defendants state on the ROR Website that they “never remove reports.” 188. Defendants state on the ROR Website, including on April 3, 2009 and on July 26, 2010 that: “Since the Ripoff Report was started in 1998, our policy has always remained the same – we never remove reports.” 189. Currently, and at all relevant times hereto including specifically on

9

April 3, 2009, June 26, 2009 and July 26, 2010, the Ripoff Report enterprise makes
10

the following statements of fact through the ROR website:
11

i.
12 13

“We . . . will not consider removal requests from anyone, including a “Ripoff Report . . . will not remove complaints even if you sue.” “We don’t write reports, and we don’t remove reports. PERIOD.”

request which claims to be from the original author of a report.” ii.
14

iii.
15 16

190. A true and correct screen shot of the ROR Website containing these statements of fact as it appeared on July 23, 2010 is attached hereto as Exhibit
17

“12.”
18

191. On May 12, 2009, Defendant Edward Magedson sent Plaintiff
19

Raymond Mobrez an e-mail containing the following false statements of fact:
20

i.
21

“Rip-off Report is a permanent record.” “a Rip-off Report cannot be taken off.” “we have a uniform policy against removing reports.” “WE DO NOT Remove any Rip-off Reports” “we do not remove a submitted Rip-off Report, and we never will.” “Some people claim we remove reports for money, but that is just plain false.”

ii.
22

iii.
23

iv.
24

v.
25

vi.
26 27

Attached hereto as Exhibit “13” is a true and accurate copy of the email sent on
28

May 5, 2009 from Magedson to Mobrez making these false statements of fact.
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192. On July 24, 2009, Defendant Edward Magedson sent Plaintiff Raymond Mobrez an e-mail containing the following false statement of fact: “We do not remove reports.” 193. The true facts are that Reports do, in fact, come down, for substantial sums of money, and after a lawsuit, and that Defendants do write portions of Reports in collaboration with CAP members or parties with whom they have settled a lawsuit. Attached previously hereto as Exhibit “11” is a true and accurate copy of a non-confidential settlement agreement between Xcentric Ventures, LLC, Ed Magedson and QED Media Group, LLC and Robert Russo whereby the parties agree that Defendants will not post any new reports regarding QED Media Group, LLC and Robert Russo, if the contributor of the report “can not prove to the reasonable satisfaction of Xcentric that he or she was an actual customer of QED,” if not, “ the report will not be posted.” Defendants’ Counsel has admitted that Reports have, on occasion, been removed from the ROR Web site, including pursuant to the QED Agreement, and that Russo owed significant sums of money to the Ripoff Report enterprise under the agreement providing for such removal. 194. In an e-mail to Texas attorney, Kenton Hutcherson, dated October 29, 2009, Defendants’ counsel, Maria Speth, stated “After further reflection, and based on issues beyond compliance with the settlement agreement, Ripoff Report has decided to completely remove report number 510675. It was deactivated yesterday.” See Declaration of Kenton Hutcherson attached hereto as Exhibit “14” (including Speth’s October 29, 2009 email to Hutcherson). 195. On July 20, 2010, during a conference between both parties, counsel for Defendants, Maria Speth, confirmed that two reports concerning Mr. Hutcherson’s former client, QED Media Group, LLC, were removed on two
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separate occasions. See Declaration of Daniel F. Blackert, attached hereto as Exhibit “15.” 196. The false statements lead those victimized to believe they have very limited courses of action. If they wish to mitigate the damage caused by these reports, they must either pay Defendants to be in the CAP or pay an information technology (“IT”) consultant to publish alternative online content to repair their reputation via search engines. 197. Plaintiffs did take such steps. On October 24, 2009, Plaintiffs posted a listing on Craigslist seeking an on site web product developer with SEO skills in order to combat the defamatory reports. advertisement. 198. On March 6, 2009, Plaintiffs paid a Search Engine Optimization consultant eight hundred and ninety ($890.00) dollars in connection with work performed to mitigate the defamatory reports on ROR. 199. Again on March 27, 2009, Plaintiffs paid a Search Engine Optimization consultant six hundred dollars ($600.00) in connection with work performed to mitigate the defamatory reports on ROR. 200. On May 14, 2009, Plaintiffs paid a Search Engine Optimization consultant eight hundred dollars ($800.00) in connection with work performed to mitigate the defamatory reports on ROR. 201. Thereafter, Plaintiffs paid a Search Engine Optimization consultant one hundred dollars ($100.00) in connection with work performed to mitigate the defamatory reports on the ROR Website. 202. Others have expended monies in order to mitigate and/or take down the defamatory posts on the ROR. 203. In or around February 2010, Tina Norris, another victim of the Content Trolling Scheme, paid $600 to Reputation Defender, and SEO consultant, to repair the damage caused in Google search results by the Reports published by the Ripoff Report enterprise in furtherance of the Content Trolling Scheme.
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Plaintiffs paid $25.00 to post this

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204. Another victim, Kathy Spano and her teenage daughter, residents of the State of California, engaged an SEO consultant on May 18, 2010 for the amount of $3,000 to repair the damage to the teenage daughter caused by the posting of negative Reports in furtherance of the Content Trolling Scheme. 205. Another victim, attorney Laura Snoke, a resident of the State of California, paid $3,500 upfront and $300 a month to maintain her own website and blogs specifically to counteract the presence of the negative Reports in Google searches. Nonetheless, clients and prospective clients mention to her the Reports. A true and correct copy of the Declaration of Laura Snoke is attached hereto as Exhibit “16.” 206. The Ripoff Report Enterprise also makes these false representations that reports are never removed even if you sue, to intimidate the victims, deflect litigation to the contributors, and reinforce the myth that Defendants are immune, thus causing victims to sit on their rights while the statute of limitations runs, and in some cases, as in Blockowicz, in fact claiming that the statute of limitations for the underlying claim has run. The false statements are intended to, and in many cases do, cause victims to believe they can only exercise legal process directed at the contributors of the Reports to get ultimate relief. Defendants do not disclose that they will disobey any injunction thus obtained. 207. On April 22, 2010, Ms. Spano’s teenage daughter currently has a lawsuit pending in Superior Court for the State of California, Riverside County, against Defendant Xcentric doing business as RipoffReport.com, Lombardo v. RipoffReport.com, (RIC 10005777) for damages due to defamation and to prevent new Reports from being published. A true and correct copy of the Riverside lawsuit is attached hereto as Exhibit “17”. 208. Likewise, Tina Norris incurred one hundred and thirty-four thousand dollars $134,000 in attorneys fees’ in obtaining the identity of authors of Reports and in obtaining injunctive relief against the contributor. Nonetheless, The Ripoff

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Report enterprise continues to acquire and publish new content from the contributor. 209. Another victim of false reports, attorney Peter Mallon, a resident of the State of California, described that he was quoted a price of $2,995 from Quick Rep Repair to commence work on repairing his online reputation. A true and correct copy of the Declaration of Peter Mallon is attached hereto as Exhibit “18.” 210. Mallon was advised by the representative of Quick Rep Repair that Defendant Magedson is generally in hiding to avoid service of lawsuits against him.” See Exhibit 18 at ¶8. In addition to selling services, such consultants prey upon the confusion, distress and panic induced in subjects of the Reports to compound rumors and speculation about the degree to which the Ripoff Report enterprise will respond to formal legal process or informal requests for help. Myths and rumors regarding the efficacy and availability of court remedies are aggravated and compounded by the legal advocacy published on the ROR Website to its unsophisticated victims. Plaintiffs are informed and believe and thereon allege that counsel for Defendants Xcentric and Magedson, Mari Crimi Speth, of Jaburg & Wilk, will accept service of process for Defendants Xcentric and Magedson. B. Defendants Falsely State That Victims Can File A Free Rebuttal and That Rebuttals Are Effective and Helpful. 211. Defendants also grossly overstate the ability of those targeted to file a

free rebuttal in response to negative Reports and grossly misrepresent the effect of rebuttals as being helpful, rather than harmful. 218. A number of people have unsuccessfully attempted to post rebuttals in response to negative Reports about them, including, but not limited to Tina Norris and Jan Smith. 219. Between July and November 2008, Tina Norris and a team of employees attempted to file positive rebuttals to reports about her and her business,
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TNT Management. Each rebuttal they submitted was in response to a different Report. Of their approximately 40 submissions, the Ripoff Report enterprise declined to post approximately half. 220. On January 19, 2010 and January 19, 2010 Jan Smith sent emails to info@ripoffreport.com complaining that rebuttals she has submitted to Reports were not being posted. See Exhibit 19. 221. This misrepresentation that subjects can always file rebuttals creates the illusion that Reports are balanced. It gives the public a sense that both positive reports and negative content can be easily posted. This is not the case. 222. The illusion created by Defendants’ misrepresentations legitimizes the complaints against Plaintiffs, thereby aggravating the harm done to the targeted business or individual by the Content Trolling Scheme. 223. On May 5, 2009 at 11:48 a.m., Defendant Edward Magedson sent Plaintiff Raymond Mobrez an e-mail containing the following statements of fact: i. shall set you free.” ii. story” iii. “file a rebuttal to the nasty Report about you, state that you had made a mistake in the past and explain how you’ve contacted (or are contacting if the rebuttal is your sole method of contact) the author of the report to make things right with them. . . We know it works.” iv. consumers.” v. “we supply a REBUTTAL feature so that the company reported has a chance to respond by agreeing, disagreeing, or apologizing and explaining what will be done to fix the issue.” “We encourage you to post a rebuttal explaining your side of the story, but we have a uniform policy against removing reports posted by “You can simply file a rebuttal and explain your side of the Best to respond to the report… Just file a rebuttal.. the truth

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vi.

“file a rebuttal that is pleasant and, if you wish, mention that

you support this forum.” A true and correct copy of Mr. Magedson’s May 5, 2009 at 11:48 a.m. email to Mr. Mobrez is attached hereto. 224. In the May 5, 2009 email, Magedson adverts to his knowledge that the public is finding Reports on search engines with the statement, “Consumers are probably finding your business on search engines that would never even know about you!” 225. Defendants do not disclose their ulterior motivation for advocating their free, rebuttal service. 226. Filing a rebuttal actually hurts those victimized on the ROR website and in search results more than it helps them. Filing a Rebuttal refreshes Google’s search indexing, thereby potentially increasing content and visits for the ROR Website site and Reports. This also raises the page ranking of the negative Report. 227. Rebuttals act as fresh content, refreshing the Reports with search engines, particularly when Defendants add paid links to advertising the content in the rebuttals. See Exhibit 2, ¶¶14-16. 228. Filing a rebuttal also requires registration and acceptance of ROR’s terms of service, which contain an Arizona venue and choice of law that clause Defendants may invoke should victims realize the effect of the Content Trolling Scheme and wish to exercise their First Amendment right of petition against Defendants in the courts. 229. The aggravating effect of submitting a rebuttal is well observed. In or about February 2010, Tina Norris paid $600 to an SEO consultant, Reputation Defender, to successfully lower the ranking of the Reports targeting her from number one to number four in Google page rankings. Thereafter, Norris also filed a rebuttal to a Report. After she filed a rebuttal, the Report went back to the number one position, rendering any work done by the consultant useless.

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230. Plaintiffs did rely on the false statements on the ROR Website on March 4, 2009 and April 3, 2009 that “the best thing you can do is to post a rebuttal.” 231. On April 3, 2009, through counsel, Plaintiffs registered with the ROR Website and thereafter posted a rebuttal. 232. Whereas on March 4, 2009, the Google search result for “Raymond Mobrez” returned a Report as third in page rank, the Google search rank for “Raymond Mobrez” currently returns a Report as the first in page rank. C. Defendants Falsely State that they have never done anything to cause Google to rank their website higher in the search results. 233. Defendants falsely misrepresent to the public that “Ripoff Report has never, ever (not now, and not in the past) done anything to cause Google to rank our website higher in search results than other sites.” This quotation appeared on the ROR website on June 26, 2009 and October 27, 2009. 234. ROR makes the following allegations on their webpage: In response to the question “I head that the Ripoff Report pays Google to get higher rankings in search results, is that true?” the Web site responds, “No. This is 100% false.” These statements appeared on the ROR website on June 26, 2009 and October 27, 2009. i. “For the record – Ripoff Report has never, ever (not now, and

not in the past) done anything to cause Google to rank our website higher in search results than other sites.” Attached hereto as Exhibit 20 is a true and accurate printout from ROR’s website dated July 26, 2010 evidencing the above. 235. Ripoff Report has, in fact, done many things to support itself as a business model and cause Google to rank postings higher by circumventing punitive changes in algorithms. The website gives Google special treatment in
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reports to maintain their high organic Google search authority and favorable ranking. 236. However, Ripoff Report has actively written and published titles, disclaimers, and comments to maintain favor with Google. They have changed the meaning of reports concerning Google in substantial ways to achieve that objective. For example, Defendants wrote a disclaimer that “this is not google.com the search company” on a report posted about Google Adsense. Defendants have changed the name of Sergey Brin, a Google founder, and editorialized about reports on Brin and Larry Evans. 237. Plaintiffs were injured both by the public’s perception and in the form of fees paid to IT consultants, loss of business over time and lost contract, both for AEI’s business and lost real estate commissions on transactions for Mobrez and Llaneras. 238. If Plaintiffs had known the true facts they would have sued ROR earlier and not delayed in trying to resolve this issue by any means other than a lawsuit, thereby taking early action to remedy the erosion in their business and property interests and loss of valuable contracts. /// E. Defendants falsely state that they do no filter or suppress reports, unlike the Better Business Bureau. 239. Plaintiffs viewed the following statements on the Ripoff Report website on August 12, 2009. The website also currently as of July 26, 2010 contains the following claims: i. “Unlike the Better Business Bureau, Ripoff Report does not hide reports of "satisfied" complaints. ALL complaints remain public and unedited in order to create a working history on the company or individual in question.” 240. Plaintiffs viewed the following statements on the Ripoff Report website on both June 26, 2009 and October 27, 2009. The website also currently contains the following claims:
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i.

“First, this site is most effective when all complaints are

maintained and preserved so that over time patterns of truly bad business practices are exposed. If we removed reports after a certain period of time, this would provide consumers with less information to use when evaluating a company. Unlike the Better Business Bureau (which deletes complaints after just 36 months), we maintain a permanent record of all complaints. This ensures that our viewers have more information rather than less.” 241. As mentioned above, Ripoff report does not post negative reports about certain businesses, including negative reports about CAP members and reports about CAP, itself and its agents. The public relies on these false statements, giving more credence to the negative reports. 242. Moreover, Defendants will not post positive reports. 243. As set forth above, plaintiffs were injured by fees paid to IT contractors and loss of business and contracts. If Plaintiffs had known the true facts they would have sued ROR earlier and not delayed in trying to resolve this issue by any means other than a lawsuit, thereby taking early action to remedy the erosion in their business and property interests and loss of valuable contracts. F. Defendants Mislead The Public When They Present CAP Members As Safe, Reliable, And Trustworthy. 244. Defendants state that they investigate the truth to posts about CAP members. They portray this process as reliable and accurate. Furthermore, they portray CAP members as those businesses that are dedicated to improving their customer service. 245. For example, ROR states: i. “Rip-off Report Investigation: John Beck – Free And Clear – Mentoring of America pledges to resolve complaints & address inquiries from the past, and in the future. Commitment to Rip-off Report Corporate Advocacy
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Business Remediation & Customer Satisfaction Program. Consumers can feel confident & secure when doing business with John Beck – commitment to 100% customer satisfaction – fulfilling commitment to provide excellent customer service – safeguards for their clients.” ii. “UPDATE Rip-off Report Investigation: John Beck Pledges To Resolve Complaints. – commitment to 100% customer satisfaction – Consumers can feel confident & secure when doing business with John Beck.” (A true and correct copy of this page of ROR dated July 26, 2010 is attached hereto as Exhibit “21.” 246. John Beck is currently being investigated by the Federal Trade Commission. In addition, the FTC, on its website, advises individuals and businesses that John Beck is running a scam and to not to business with him. (A true and correct copy of the aforementioned page is attached hereto as Exhibit “22.” 247. In fact, Defendants conduct CAP investigations strictly through the email and Defendant Ed Magedson is the only one involved in the process. A true and correct copy of portions of the 30(b)(6) deposition of Ed Magedson evidencing the above is attached to the Declaration of Daniel Blackert as Exhibit 15. 248. As set forth above, Plaintiffs were injured by fees paid to IT contractors and loss of business and contracts. 249. If Plaintiffs had known the true facts they would have sued ROR earlier and not delayed in trying to resolve this issue by any means other than a lawsuit, thereby taking early action to remedy the erosion in their business and property interests and loss of valuable contracts.

FIRST CLAIM FOR RELIEF UNFAIR BUSINESS PRACTICES - CALIFORNIA BUSINESS & PROFESSIONS CODE § 17200, et seq.)
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(Against All Defendants) 250. Asia Economic Institute re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 251. Plaintiffs have standing pursuant to California Business and Professional Code Section 17204. 252. Plaintiffs allege violations of California Business & Professions Code § 17200 on behalf of themselves and the public (Private Attorney General). 253. Defendants’ acts and practices as alleged herein constitute unlawful, unfair, and/or fraudulent business practices in violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. 254. Defendants are engaged in unlawful business acts or practices by, among other things: 255. Defendants have repeatedly and intentionally used their Websites as a scheme t7 obtain money from AEI and other companies by means of false and fraudulent representations made by the Defendant concerning the legitimacy of Defendants’ Web site. This conduct amounts to wire fraud under 18 U.S.C. § 1343. 256. Defendants are engaged in unfair business acts or practices by, among other things: 257. Defendants have engaged in conduct the utility of which is outweighed by the gravity of the consequences to the Plaintiffs and the public. 258. Defendants have engaged in conduct that is immoral, unethical, unscrupulous, and substantially injurious to Plaintiff and the public. 259. Defendants have engaged in conduct that undermines and violates the policies set out in 18 U.S.C. § 1962(c) and 18 U.S.C. § 1343. 260. Defendants are engaged in fraudulent business acts or practices by, among other things:

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a. Defendants represent themselves as consumer advocates. However, this description is false and misleading for reasons stated above including: b. Defendants allow users to post personal complaints and air grievances that fall well outside the definition of consumerism. Such complaints include allegations of adultery, sexual assault, and pedophilia. c. Defendants mislead the public into believing they have presented an unbiased description of the targeted business or individual, However, Defendants refuse to publish positive reports concerning these targets and, on occasion, fail to publish rebuttals disputing the allegations contained in the negative report. d. Defendants label businesses or individuals enrolled in the Corporate Advocacy Program as “verified safe” with insufficient investigation of the veracity of this statements. e. Defendants solicit false and defamatory complaints against Plaintiffs and others so that they may profit from sales of their “Ripoff Revenge” guidebook and membership in their Corporate Advocacy Program. 261. Defendants’ statements about products and services offered for sale by participants in the CAP and Verified Safe Program are “endorsements” within the meaning of Section 5 of the FTC Act, 15 U.S.C. § 45, because consumers are likely to believe such statements reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser. 262. Defendants fail to disclose material information that would be likely to influence a consumer regarding the terms of Defendants’ endorsements and testimonials under the Corporate Advocacy Program and Verified Safe Program. 263. Defendants have failed, and continue to fail, to disclose to consumers in advertising the fact or the amount of material considerations paid to Defendants
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for endorsing or “Verifying Safe” a business, in violation of Section 5 of the FTC Act, 15 U.S.C. § 5, and Federal Trade Commission 16 C.F.R. Part 255.0 et seq. as updated effective December 1, 2009 expressly to issue new Guides that confirm Section 5 of the FTC Act applies to statements on blogs, and Internet communities. 264. Defendants are subject to liability for false or unsubstantiated statements made through these endorsements. 265. Without injunctive relief, the Plaintiffs and others similarly situated will continued to be harmed by the Defendants’ unlawful, unfair and fraudulent business practices. In addition, Plaintiff is entitled to recover its costs of suit and attorney. SECOND CLAIM FOR RELIEF COMMON LAW DEFAMATION (Against All Defendants) 266. Asia Economic Institute re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 267. Defendants published defamatory materials on Defendants’ websites regarding Plaintiffs. 268. The publications contain false and misleading information and have brought Plaintiffs into disrepute among members of the marketplace. In addition, said defamatory comments have harmed Plaintiffs’ integrity, good-will, reputation, and good name in the community. 269. Defendants knew or should have known that the defamatory posts would cause serious harm to Plaintiffs. Defendants intended that the defamatory posts impact the way the public views Plaintiffs, as well as their business. 270. Defendants knew that the publications included false information or otherwise acted with reckless disregard of the truth or falsity contained in their publications. Further, Defendants refuse to investigate the truth or falsity of such

Amended Complaint - 59

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statements to the detriment of Plaintiffs, as well as other businesses and individuals. 271. Defendants’ publications damaged Plaintiffs’ business reputation and have prejudiced it in the conduct of its business, and have deterred customers and potential customers from dealing with it. 272. Plaintiffs have been injured in its reputation, business, and property by reason of Defendants’ publications in an amount to be determined at trial. THIRD CLAIM FOR RELIEF DEFAMATION PER SE (Against All Defendants) 273. Asia Economic Institute re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 274. Defendants published the statements attached hereto at “Exhibit 13.” 275. The Reports published by Defendants regarding Plaintiff are false and were published with malice and reckless disregard for the truth or falsity of such stories with intent to injure Plaintiff, its business reputation, and to illegally divert prospective employees from the Plaintiff’s employ. 276. Defendants do not verify the truth or accuracy of the stories contained on their websites. Defendants publish the stories and hold Plaintiffs out to the public as a “rip-off.” 277. The stories published and written by the Defendants contain false information about the Plaintiffs’ business relationships and falsely allege the Plaintiffs are engaged in criminal conduct. Such statements include that AEI is “laundering money,” that AEI “lie cheat tax fraud,” “reduce pay illegally,” and is a “SCAM.” These false statements constitute defamation per se under all applicable laws.

Amended Complaint - 60

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278. The false statements of fact published on the Defendants’ website are unambiguous and when read by the public searching for the Plaintiffs, the libelous nature of such statements are clear. A reasonable person would have understood these statements to mean that Plaintiffs have committed a crime. 279. As a direct and proximate result, Plaintiffs have been damaged in its good name and reputation, has suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost prospective employees, and it continue to suffer increasing damages on a daily basis. Defendants’ defamatory publication entitles AEI to compensatory and punitive damages in an amount to be determined at trial. FOURTH CAUSE OF ACTION FALSE LIGHT (Against All Defendants) 280. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 281. Defendants’ statements have placed Plaintiffs in a false light by representing Plaintiffs as scam artists, criminals, racists, unqualified, and incapable of providing a valuable service to the community. It is important to note that Plaintiffs have provided valuable resources for the public and wish to continue to do so. However, Defendants so-called “rip-off reports” have tainted Plaintiffs business, so much so that Plaintiffs have lost and continue to lose countless business relationships and employees. In other words, the defamatory posts posted on Defendants’ websites have halted Plaintiffs’ business. 282. The false light in which Plaintiffs have been placed as a result of the Defendants’ statements would be highly offensive to a reasonable person in the Plaintiffs’ position. 283. Defendants knew that the statements were false, or Defendants acted in reckless disregard for the truth or falsity of those statements.
Amended Complaint - 61

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384. As a direct and proximate result of Defendants’ wrongful statements, Plaintiffs have sustained harm to their business in an amount to be proven at trial. FIFTH CAUSE OF ACTION INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC RELATIONS (Against All Defendants) 285. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 286. AEI had valid contractual relationships with current and prospective employees and had expected relationships with persons who, but for Defendant’s libelous publications, would have entered into valid contractual relationships. 287. Defendants knew, when falsely and publicly making these defamatory statements about the Plaintiffs, that Plaintiffs had these valuable contracts and business expectancies. 288. Defendants intentionally and wrongfully interfered with these relationships by knowingly publishing, creating, and soliciting negative, false, and defamatory content in exchange for their own business profit. 289. As a result of the Defendants’ wrongful conduct, the relationship between the Plaintiffs and its employees has been disrupted. In fact, one complainant claims that he was “considering starting a position at this company…” until he “came home and googled his name, and found all these bad reports.” The complaint further asserts that “as a result of these reports, [he is] going to blow him off.” 290. As a direct and proximate results of the foregoing wrongful acts, Plaintiffs have been damaged in their good name and reputation, have suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost current as well as prospective employees, and it continues to suffer
Amended Complaint - 62

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damages.

Plaintiffs have also lost valuable contracts. Defendants’ tortuous

interference with AEI’s business relations entitles AEI to compensatory and punitive damages in an amount to be determined at trial. SIXTH CAUSE OF ACTION NEGLIGENT INTERFERENCE WITH PROSPECTIVE ECONOMIC RELATIONS (Against All Defendants) 291. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 292. AEI had valid contractual relationships with current and prospective employees and had expected relationships with persons who, but for Defendant’s libelous publications, would have entered into valid contractual relationships. 293. Defendants knew, when falsely and publicly making these defamatory statements about the Plaintiffs, that Plaintiffs had these valuable contracts and business expectancies. 294. Defendants negligently interfered with these relationships by knowingly publishing and creating negative, false, and defamatory content in exchange for their own business profit. 295. The relationships between the Plaintiffs and its employees were thereafter disrupted by the Defendants’ conduct. 296. As a direct and proximate results of the foregoing wrongful acts, Plaintiffs have been damaged in their good name and reputation, have suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost current as well as prospective employees, and it continues to suffer damages. Plaintiffs have also lost valuable contracts. Defendants’ tortuous interference with AEI’s business relations entitles AEI to compensatory and punitive damages in an amount to be determined at trial.

Amended Complaint - 63

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SEVENTH CAUSE OF ACTION NEGLIGENT INTERFERENCE WITH ECONOMIC RELATIONS (Against All Defendants) 297. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as fully set forth herein. 299. AEI had a valid contractual relationships with current and prospective employees. 300. Defendants knew, when falsely and publicly making these defamatory statements about the Plaintiffs, that Plaintiffs had these valuable contracts. 301. Defendants intentionally and wrongfully interfered with these relationships by knowingly publishing and creating negative, false, and defamatory content in exchange for their own business profit. Defendants intentionally and wrongfully caused these employees to breach their employment contracts with Plaintiffs. 302. As a result of the Defendants’ wrongful conduct, the relationship between the Plaintiffs and its employees has been disrupted. In fact, one complainant claims that he was “considering starting a position at this company…” until he “came home and googled his name, and found all these bad reports.” The complaint further asserts that “as a result of these reports, [he is] going to blow him off.” 303. Defendant’s wrongful conduct is, therefore, a substantial factor in causing Plaintiffs’ harm. 304. As a direct and proximate results of the foregoing wrongful acts, Plaintiffs have been damaged in their good name and reputation, have suffered great loss of its goodwill, has suffered diminution in its value as a business entity, has lost current as well as prospective employees, and it continues to suffer damages. Plaintiffs have also lost valuable contracts. Defendants’ tortuous

Amended Complaint - 64

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interference with AEI’s contractual relations entitles AEI to compensatory and punitive damages in an amount to be determined at trial. EIGHTH CAUSE OF ACTION INJUNCTION (Against All Defendants) 305. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 306. Defendants have wrongfully and unlawfully solicited, developed, and published on the Websites numerous false and misleading statements of fact concerning AEI and its owners. 308. On or about May 5, 2009, Plaintiff Mobrez requested that defendants remove these false and defamatory statements from the Ripoffreport.com website. Defendants have refused, and still refuse, to remove false and misleading statements after repeated requests by the Plaintiffs. 309. Plaintiffs have been and will continue to suffer immediate and irreparable damage if Defendants are not enjoined during the pendency of this lawsuit from disseminating or publishing false, misleading, and defamatory comments regarding AEI, Mobrez, and Llaneras. The dissemination or publication of these false, misleading, and defamatory posts continues to impact AEI’s business opportunities and dissuades prospective clients from doing business with AEI. 310. Plaintiff has no adequate remedy at law for the injuries being suffered as the Plaintiff will be forced to institute a multiplicity of suits to obtain adequate compensation for their injuries. 311. There is a substantial likelihood that Plaintiffs will prevail on the merits. Defendants have been repeatedly notified to cease and desist disseminating or publishing these defamatory statements concerning AEI and its business, but they have continued to host such statements on their Websites with the understanding that such disparaging acts would be detrimental to the Plaintiffs.
Amended Complaint - 65

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312. Any harm associated with the entry of a preliminary injunction is outweighed by the potential damage to AEI’s goodwill and reputation. Defendants will not suffer monetary losses if they are forced to remove the false and defamatory statements regarding the Plaintiffs and to remove references to Plaintiffs from Defendants’ HTML. 313. Further, the public interest will be served by preventing the dissemination of false and misleading statements about other businesses and individuals. 314. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 315. Plaintiffs further ask the Court to set its application for injunctive relief for a full trial on the issue in this application, and after the trial, to issue a permanent injunction against Defendants from disseminating or publishing false, misleading, and defamatory statements concerning the Plaintiffs. NINTHCAUSE OF ACTION DECEIT CALIFORNIA CIVIL CODE §§ 1709, 1710) (Against All Defendants) 316. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 317. Cal. Civ. Code § 1709 prohibits willful deception of another with intent to induce a detrimental change in position. 318. Cal. Civ. Code § 1710 provides in relevant part that “deceit…is either: I. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; II. The assertion, as a fact, of that which is not true, by one who does not believe it to be true; III. The suppression of a fact, by one who is bound to disclose it, or who give information of other facts which are likely to mislead for want of communication of that fact; or,
Amended Complaint - 66

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IV. A promise, made without any intention of performing it.” 319. Defendants have and continue to violate Cal. Civ. Code § 1709 by willfully deceiving Plaintiffs and others with the intent to induce a detrimental change in their positive. 320. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1710(1) by suggesting that: (1) they have not and will not remove reports published on their Web site; (2) that filing a rebuttal has only a positive effect; (3) that Defendants have done nothing to curry favor with Google; and (4) that Defendants do not filter or suppress reports. 322. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1710(2) by asserting that: (1) they have not and will not remove reports published on their Web site; (2) that filing a rebuttal has only a positive effect; (3) that Defendants have done nothing to curry favor with Google; and (4) that Defendants do not filter or suppress reports. 323. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1710(3) by suppressing the fact that: (1) Defendants have removed reports; (2) filing a rebuttal gives more prominence to the report on Internet search results; (3) that Defendants have edited reports concerning Google to maintain its good favor; (4) that Defendants will not post positive reports nor will they publish reports concerning members of their CAP; and (5) CAP members are not sufficiently investigated. 324. Plaintiffs were harmed by these allegations. Had they known the true facts, Plaintiffs would not have hired IT consultants to repair their online reputation and would not have filed a rebuttal with the Defendants. 325. Pursuant to Cal. Civ. Code § 1709, Defendants are liable for any damage which was proximately caused to Plaintiffs as a result of Defendants’ deceit.

Amended Complaint - 67

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TENTH CAUSE OF ACTION FRAUD (CAL. CIVIL CODE § 1572) 326. Plaintiffs re-allege and incorporate by reference all preceding paragraphs as fully set forth herein. 327. Cal. Civ. Code § 1572 provides that “[a]ctual fraud…consists of any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: I. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; II. The positive assertion, in a manner not warranted by the information the person making it, of that which is not true, though he believes it to be true; III. The suppression of that which is true, by one having knowledge or belief of the fact; IV. A promise made without any intention of performing it; or V. Any other act fitted to deceive. 328. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572 by suggesting that: (1) that victims have the option of filing a free rebuttal to the negative complaints; (2) that filing a rebuttal has only a positive effect; (3) that Defendants have done nothing to curry favor with Google; and (4) hat Defendants do not filter or suppress reports. At the time these suggestions were made, Defendants did not believe this to be true. 329. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572 by asserting that: (1) by asserting that: they have not and will not remove Reports published on the ROR Website; (2) that filing a rebuttal has only a positive effect; (3) that Defendants have done nothing to curry favor

Amended Complaint - 68

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with Google; (4) that Defendants do not filter, change or suppress Reports. At the time these assertions were made, Defendants did not believe this to be true. 330. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572 by asserting that: (1) by suppressing the fact that: (2) filing a rebuttal gives more prominence to the Report on Internet search results; and (3) that Defendants have edited reports concerning Google to maintain its good favor. 331. As described above, Defendants have violated and continue to violate Cal. Civ. Code § 1572(5) by making false misrepresentations which were intended to lure targeted businesses and individuals into paying to enroll in CAP and otherwise put victims in a helpless, desperate position. 332. As a direct and proximate result of Defendants’ actions, Plaintiffs will continue to suffer damages. WHEREFORE, Plaintiffs pray for judgment against defendants: 1. For general damages according to proof, including but not limited to the following: a. Legal fees incurred as a result of litigating the present case in the amount of $21,700 to date; b. Costs expended litigating the present case in the amount of $7,400 to date; c. Amounts invested in assets, business, goodwill and operations of Asia Economic Institute, LLC to date of at least: d. Rented office space to date: $347,983 e. Phone and Internet Communications to date: $34,809 f. Move-in Costs to date: $31,950 g. Accrued start-up costs to date: $12,500 h. Miscellaneous expenses to date: $8,900

Amended Complaint - 69

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i. Amounts expended in traveling to Washington, DC and advocating to representatives and lawmakers for a change in the statute in the amount $2,500 to date j. Salaries or fees paid to SEO Experts, IT consultants, LAMP developers, software licenses, computer programmers and other consultants, contractors and vendors or services to the business of AEI; k. Cost of registering and maintaining domain names and hosting services and servers to host and operate the websites of AEI and AEI’s educational, publishing and business missions; l. Real estate transaction broker or license fees and commissions, and other existing and prospective property interests in commercial transactions, on which Mobrez and Llaneras would earn fees, and to which Plaintiffs Mobrez and Llaneras were entitled and were lost by reason of Defendants’ acts complained of herein; 2. For special damages according to proof; 3. For punitive damages according to proof; 4. For a preliminary injunction requiring Defendants to remove from the Website any false and defamatory statements concerning AEI or its employees and prohibiting Defendants from later publishing such statements on the Websites; 5. For a permanent injunction requiring Defendants to remove from the ROR Website, both in Reports and in associated HTML, false, defamatory or negative statements or keywords; 6. For prejudgment interest at the legal rate; 7. For costs of suit incurred herein; 8. For attorneys’ fees; and 9. For such other and further relief as the Court may deem just and proper.

Amended Complaint - 70

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DATED: August 15, 2010 /s/ Daniel F. Blackert By: DANIEL F. BLACKERT LISA J. BORODKIN Attorneys for Plaintiffs, Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras

DEMAND FOR JURY TRIAL Plaintiffs Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras hereby demand a trial by jury. DATED: August 15, 2010 /s/ Daniel F. Blackert By: DANIEL F. BLACKERT LISA J. BORODKIN Attorneys for Plaintiffs Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras

Amended Complaint - 71

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Amended Complaint - 72

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 368 of 439

Exhibit N

CaseCase 2:11-cv-01426-GMS Document 166-1 Filed 09/20/10 Page 1 of 1 439 ID 2:10-cv-01360-SVW -PJW Document 144 12/10/12 369 of Page #:4196

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL Case No. Title CV10-1360-SVW-PJWx Asia Economic Institute et al v. Xcentric Ventures LLC et al Date September 20, 2010

Present: The Honorable Paul M. Cruz Deputy Clerk

STEPHEN V. WILSON, U.S. DISTRICT JUDGE Deborah Gackle Court Reporter / Recorder Tape No.

Attorneys Present for Plaintiffs: Lisa Boradkin Proceedings:

Attorneys Present for Defendants: David S. Gingras Maria C. Speth

1. MOTION TO DISMISS FIRST AMENDED COMPLAINT FILED BY DEFENDANTS [110] (fld 08/06/10) 2. MOTION FOR RELIEF FROM MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT FILED BY PLAINTIFFS [115] (fld 8/16/10) 3. MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT FILED BY PLAINTIFFS [116] (fld 8/16/10) 4. MOTION FOR RECONSIDERATION RE ORDER #94 FILED BY PLAINTIFFS [118) (fld 8/16/10) 5. MOTION TO STRIKE MATERIAL FROM DOCUMENTS 118 AND 121 AND MOTION FOR SANCTIONS [124]

Hearing held. The motion reconsideration [118] is denied. Order to issue. The RICO claims are stricken. The first amended complaint is the operative document. The Court sets the following schedule: Filing of Motion for Summary Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . September 27, 2010 Opposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 4, 2010 Reply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 12, 2010 Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 1, 2010 at 1:30 p.m.

: Initials of Preparer
CV-90 (06/04) CIVIL MINUTES - GENERAL

20

PMC
Page 1 of 1

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 370 of 439

Exhibit O

Page 1 of 2 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 371 of 439 David Gingras
From: Sent: To: Cc: Lisa, This email is to follow-up and document our phone conversation this morning. As I told you on the phone, it has come to our attention that you have spoken with James Rogers who was previously employed as Ed Magedson’s personal assistant and who, until recently, also was involved in a personal intimate relationship with Ed. I know that you talked with James on the phone and that you have made plans to fly him out to LA tomorrow morning (Saturday, Oct. 23rd) so that he can meet with you and share whatever information he may have. As we discussed, obviously I cannot prevent you from conducting an informal ex parte interview of James even though discovery is stayed. At the same time, if you interview or depose James without me or Maria being present, then whatever information or testimony he provides to you will not be admissible in our case per Fed. R. Civ. P. 32(a)(1). Based on this, I told you that it was my belief that you intend to interview James tomorrow and then on Nov. 1st (or some other date) ask the court for relief under Rule 56(f) so that you can formalize his testimony in a deposition, thereby delaying the ruling on our summary judgment motion. You basically confirmed that this was your intent, though you indicated that you intend to file an ex parte request under Rule 56(f) prior to Nov. 1st. With due respect, I note that you have made similar statements several times in the past without actually filing such a motion. As I explained to you on the phone, Xcentric believes that James has no relevant or useful information that would affect the pending MSJ in our case. As such, we believe that your proposed Rule 56(f) motion is groundless and would do nothing but needlessly prolong the inevitable disposition of this action. Having said this and although we believe that your proposed Rule 56(f) motion is untimely and otherwise improper, we are nevertheless willing to obviate your 56(f) motion by agreeing to immediately allow you to take James’s deposition. We are willing to do this even though discovery is stayed and even though we believe the deposition will not reveal any relevant information. We are willing to do this because we want to “cut to the chase” here. By allowing you to obtain James’s testimony now, you can confirm for yourself that he has nothing relevant or helpful to offer you and in that case there will be no need for you to seek Rule 56(f) relief (at least as to James), nor will it be necessary to move the Nov. 1st hearing date which, as you know, is already a continuation of the last trip we made to LA. As such, my proposal would avoid any further prejudice that Xcentric will incur as a result of further prolonging the disposition of this case such as would occur if your untimely Rule 56(f) motion was granted. At the same time, my proposal would give you the exact same relief you would get under Rule 56(f) notwithstanding my position that you are not entitled to that relief. Again – to be clear – my offer is to allow you to take the deposition of James Rogers immediately at any time prior to Nov. 1st and at any place (though I told you I felt that Arizona was the far more appropriate place for the deposition to occur). In response, you indicated to me that you did NOT want to accept my offer at this time, but you also stated that you would speak to your client and let me know if the offer is acceptable. I responded by explaining to you that if you are not willing to agree to this offer, then I intend to provide this email to the court as part of my opposition to any request you make under Rule 56(f) or any other request that would result in moving the existing Nov. 1st hearing date. If you do not accept this offer, then it will be my position that David Gingras [david@ripoffreport.com] Friday, October 22, 2010 12:26 PM 'lborodkin@gmail.com'; 'blackertesq@yahoo.com' 'mcs@jaburgwilk.com'; 'Adam S. Kunz'

Subject: AEI v. Xcentric -- Phone call follow-up re: James Rogers

12/10/2012

Page 2 of 2 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 372 of 439
your Rule 56(f) motion should be denied as simply unnecessary (in addition to several other substantive objections defendants have to such a motion). Please note that my offer remains open as long as necessary, provided that you allow yourself enough time to complete the deposition and make any motions you want which relate to the testimony you obtain from James prior to Nov. 1st. In other words, if you believe that James will give you testimony that you need to provide to the court as part of the issues being discussed on Nov. 1st (which you should already know given your prior phone conversations with James which I understand began several weeks ago), then I expect you will take his deposition as soon as you possibly can and that you will not seek to move the Nov. 1st hearing based on the need for additional time. Of course if you do accept this offer, I would appreciate no less than 24 hours notice so that I can make sure that both James and I are available. If any part of this email does not accurately reflect our discussion, please let me know immediately. David Gingras, Esq. General Counsel Xcentric Ventures, LLC http://www.ripoffreport.com/ David@RipoffReport.com

PO BOX 310, Tempe, AZ 85280 Tel.: (480) 668-3623 Fax: (480) 248-3196

12/10/2012

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 373 of 439

Exhibit P

CaseCase 2:11-cv-01426-GMS Document 166-1 Filed 06/15/11 Page 1 of 1 439 ID 2:10-cv-01360-SVW -PJW Document 186 12/10/12 374 of Page #:5106

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 375 of 439

Exhibit Q

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 376 of 439

David Gingras
From: Sent: To: daniel F. Blackert, esq. [blackertesq@yahoo.com] Friday, May 07, 2010 10:26 PM david@ripoffreport.com

Subject: Re: AEI et al. v. Xcentric (C.D. Cal. 10-cv-1360) Draft Rule 26f Report

David,
In light of todays events I believe I have a serious conflict of interest between myself and my client. I will do whatever state bar mandates. I have called today but they do not resume until monday. In light if todays developments which were contradictory to anything I have heard, seen, or discussed w my clients. I will act in accordance w my ethical obligations 100 percent. You have to realize this is a shock to me. Per my own indepedent research I need to withdraw from the case and explain why. In light of todays events I have a serious conflict of interest and will withdraw as counsel. In addition I explained to my clients the implications of todays events and that I can no longer represent them per ethical obligations and will explain to the court why in a dec. My only concern is still seeking correct anaccurae advice from the state bar and acting accordingly. Moreover, I urged my client to dismiss this case. I need to review the ethical rules in more detail and talk w the ethics hotline. As lead counsel, I believe in good faith,sadly, that I can no longer move this case forward and do not intend to do so. I am taking this very seriously and am completely shocked. Daniel Sent from my Verizon Wireless BlackBerry

7/18/2011

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 377 of 439

Exhibit R

Case 2:11-cv-01426-GMS Document 166-1 68 Filed 06/14/10 Page 1 of 3 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 378 of 439

Case 2:11-cv-01426-GMS Document 166-1 68 Filed 06/14/10 Page 2 of 3 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 379 of 439

Case 2:11-cv-01426-GMS Document 166-1 68 Filed 06/14/10 Page 3 of 3 Case 2:10-cv-01360-SVW-PJW Document Filed 12/10/12 Page 380 of 439

Case 2:10-cv-01360-SVW-PJW Document 68-1 Filed 06/14/10 Page 1 of 24 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 381 of 439

Case 2:10-cv-01360-SVW-PJW Document 68-2 Filed 06/14/10 Page 1 of 23 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 382 of 439

Case 2:10-cv-01360-SVW-PJW Document 68-3 Filed 06/14/10 Page 1 of 37 Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 383 of 439

Case 2:11-cv-01426-GMS Document 166-1 Filed 12/10/12 Page 384 of 439

Exhibit S

Case Case 2:11-cv-01426-GMS Document 166-1 Filed 08/03/10 Page 1 of 44 439 ID 2:10-cv-01360-SVW -PJW Document 101 Filed 12/10/12 Page 385 of Page #:3106

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DANIEL F. BLACKERT CSB No. 255021 LISA J. BORODKIN CSB No. 196412 Asia Economic Institute 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Telephone (310) 806-3000 Facsimile (310) 826-4448 Blackertesq@yahoo.com lisa_borodkin@post.harvard.edu Attorneys for Plaintiffs, Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ) ) ) ) ) ) Plaintiffs, ) ) vs. ) ) XCENTRIC VENTURES, LLC, an ) Arizona LLC, d/b/a as BADBUSINESS ) BUREAU and/or ) BADBUSINESSBUREAU.COM ) and/or RIP OFF REPORT and/or ) RIPOFFREPORT.COM; BAD ) BUSINESS BUREAU, LLC, organized ) ) and existing under the laws of St. ) Kitts/Nevis, West Indies; EDWARD MAGEDSON an individual, and DOES ) ) 1 through 100, inclusive, ASIA ECONOMIC INSTITUTE, a California LLC; RAYMOND MOBREZ an individual; and ILIANA LLANERAS, an individual, Defendants. Case No.: 2:10-cv-01360-SVW-PJW DISCOVERY MATTER The Honorable Patrick J. Walsh PLAINTIFFS’ EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER REGARDING (1) THE PRESERVATION OF ELECTRONICALLY STORED INFORMATION (“ESI”) AND (2) FOR PROTECTIVE ORDER PREVENTING INTERFERENCE WITH WITNESSES; MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATION OF LISA J. BORODKIN AND CERTIFICATION OF COMPLIANCE WITH LOCAL CIVIL RULES 7-3 AND 7-19] [DECLARATION OF JOE REED, DECLARATION OF JAN SMITH] [PROPOSED ORDER LODGED CONCURRENTLY HEREWITH] Date: August 5, 2010 or tba Courtroom: 827A

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TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on August 5, 2010 or at any other time as this Honorable Court may deem proper, Plaintiffs Asia Economic Institute, LLC, Raymond Mobrez, and Iliana Llaneras (“Plaintiffs”) will and hereby do move ex parte for a temporary restraining order (“TRO”) regarding preservation of electronically stored information (“ESI”), specifically requiring Defendants Xcentric Ventures, LLC, and Edward Magedson (hereinafter “Defendants”) to: (a) refrain from irrevocably overwriting the SQL server and databases for the website hosted at Ripoffreport.com (the “Website”) and to create back-ups to preserve the HTML and electronic data relating to the 58 web pages identified in the pleadings (less than one-tenth of one percent out of the over 627,870 web pages in Defendants’ database); (b) provide a statement under oath as to the steps they have taken reasonable steps to preserve relevant ESI from the inception of this litigation on January 28, 2009; and (c) insert the meta tag <meta name-“Robots” content=”noindex,nofollow”> into the HTML for the 5 web pages concerning plaintiffs to prevent further harm from indexing from search engines. In addition, Plaintiffs will and hereby do move ex parte for a protective order under Federal Rule of Civil Procedure 26(c) ordering Defendants and Defendants’ counsel to refrain from improperly interfering with any witness for the purpose of gaining an advantage in this action, particularly until discovery is resumed. This application is made on the grounds that (1) Defendants have expressly indicated, and the District Court found, in another case, G.W. Equity v. Xcentric Ventures, that Defendants will not and could not preserve all ESI in their database and permit overwriting of the SQL data in their database, including specific
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electronically stored evidence (“ESI”) relevant and discoverable to this action; and that on July 28, 2010 Defendants’ counsel telephoned and wrote one of Plaintiffs’ witnesses that submitted a declaration in support of Plaintiffs’ First Amended Complaint seeking, inter alia, to influence the witness to submit a declaration supplementing the record with facts dictated by Defendants and demanding that he

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refrain from representing certain potential clients in matters related to Defendants.
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The necessity for the ex parte relief on the TRO is that imminent destruction
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of requested documents and ESI by Defendants prior to a judicial determination of the scope of discovery would produce great and irreparable injury to Plaintiffs; Defendants have indicated that they have and will continue to permit overwriting of ESI by their SQL servers; the requested ESI preservation measures are to preserve the status quo, are reasonably limited in scope and not unduly expensive: and mitigating the continuing, future harm with the requested meta tag temporarily prevents further indexing of web pages concerning Plaintiffs on search engines such as Google but does preserves the status quo regarding Defendants’ Website and does not interfere with Defendants’ First Amendment rights or otherwise prejudice Defendants in expressing themselves on their Website. The necessity of ex parte relief on the Protective Order under Rule 26(c) is that good cause exists to protect non-party witnesses from unwanted and improper interference from Defendants’ counsel demanding procedurally improper filing of supplements to the record while the matter is still at the pleading stage; as discovery is currently on hold in this action, Defendants will not be prejudiced by a Protective Order preventing them from seeking to compel discovery from nonvoluntary, third-party witnesses in this action at this time; Defendants will be

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entitled to resume proper discovery mechanisms should this matter proceed to
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discovery; and the circumstances and timing of Defendants’ counsels’ call and
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demand letter to Plaintiffs’ witness give rise to an inference that the effect was to chill the witnesses’ participation in this particular action, and to unduly coerce an outcome in this particular action. Ex Parte Notice. As set forth in the declaration of Lisa J. Borodkin, proper notice of this application was given to Defendants’ counsel, as required by Local

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Civil Rule 7-19 and this Court’s procedures.
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This application is based upon all pleadings on file in this action, including
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the Complaint and Amended Complaint on file in this case, the Memorandum of Points and Authorities attached hereto, the Declarations of Lisa J. Borodkin and Joe Reed, the exhibits thereto, upon any argument, matters of which this Court may take judicial notice or otherwise as may be presented at the hearing on this matter. The grounds for making this Motion ex parte are that Plaintiffs suffer, and will continue to suffer irreparable harm and prejudice to their claims by Defendants’ continued destruction and loss of electronic evidence relevant to the claims in this action, and that Defendants have been asked and have to date refused to provide a statement regarding the reasonable steps they have taken to preserve ESI relevant to this action, and that Defendants’ counsel has recently contacted one of Plaintiffs’ witnesses extrajudicially with demands that such witness create and file evidence improperly with this Court and refrain from taking employment adverse to Defendants. This Motion is based on Federal Rule of Civil Procedure 26(b) and 26(c), this Court’s inherent authority, the attached Memorandum of Points and Authorities, Declaration of Joe Reed, Declaration of Jan Smith, Declaration of Lisa J. Borodkin and the exhibits thereto, the pleadings, papers and proceedings in this action, and such other matters as the Court deems proper.

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This Motion is made following the conferences of counsel on April 27, 2010, June 24, 2010, July 20, 2010 and July 30, 2010, written communications between counsel dated April 22, 2010, April 27, 2010, May 27, 2010, May 29, 2010, May 30, 2010, and July 14, 2010 and July 30, 2010, and by contacting Defendants’ counsel pursuant to L.R. 7-3 and notice of this ex parte application pursuant to L.R. 7-19 on July 30, 2010. The undersigned counsel has advised counsel for Defendants that such an ex parte motion will be made to this Court. Defendants’ counsel are David S. Gingras, Xcentric Ventures, LLC, P.O. Box 310, Tempe, AZ 85280, (480) 6683623, david@ripoffreport.com, and Mari Crimi Speth, Jaburg & Wilk, P.C. 3200 N. Central Ave., Suite 2000, Phoenix, AZ 85012, (602) 248-1089, mcs@jaburgwilk.com; and Paul S. Berra, 1404 Third Street Promenade, Suite 205, Santa Monica, CA 90401 (310) 394-9700, paul@berra.org. Defendants’ counsel have indicated that they will oppose the motion and request to be present at any hearing on the motion. DATED: August 5, 2010 Respectfully submitted, By: /s/ Lisa J. Borodkin Daniel F. Blackert Lisa J. Borodkin Attorneys for Plaintiffs Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneeras

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TABLE OF CONTENTS I. FACTUAL AND PROCEDURAL BACKGROUND……………………1 A. B. C. D. E. II. Procedural History..…………………………………………………1 Nature of the Case……...……………………………………………2 Relevance of Electronically Stored Information (“ESI”)…………3 Plaintiffs’ Efforts To Confirm Defendants’ Preservation of ESI...5 Basis for Protective Order Re: Interference With Witnesses…….9

THIS COURT HAS THE POWER TO ISSUE THE REQUESTED TRO REGARDING ESI…………………………….……………………11 A. B. Defendants Have a Duty to Preserve ESI...................……………11 The Facts Here Satisfy the 3-Part Test of Capricorn Power Co....13

III.
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“GOOD CAUSE” EXISTS FOR A PROTECTIVE ORDER FOR INTERFERENCE WITH WITNESSES………………………………...15 A. B. Applicable Standards under Federal Rule of Civil Procedure 26(c) ……………………………………………………………………….15 Plaintiffs Will Be Prejudiced Unless a Protective Order Issues ……………………………………………………………………….18

IV.

CONCLUSION……………………………………………………………20

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TABLE OF AUTHORITIES Cases Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) ……………………..3 Brulotte v. Regimbal, 368 F.2d 1003 (9th Cir. 1966)…………………………….16 Capricorn Power Co. v. Siemens Westinghouse Power Corp., 220 F.R.D. 429 (W.D. Pa. 2004)………………………………………………….13 Columbia Pictures Indus. v. Fung, 2001 U.S. Dist. LEXIS 97576 (C.D. Cal. June 8, 2007)...………………..11, 13, 17 Gordon Partners, et. al. v. Blumenthal, 244 F.R.D. 179 (S.D.N.Y. 2007)………..12 GW Equity v. Xcentric Ventures, LLS et al. (N.D. Tex. 3:07-cv-00976-O, DN-242, Oct. 8, 2008)..………………………........9 Hous. Rights Ctr. v. Sterling, 2005 U.S. Dist. LEXIS 44769 (C.D. Cal. Mar. 2, 2005)………………………….12 In re Coordinated Pretrial Proceedings 669 F.2d 620 (10th Cir. 1982)…………...17 In re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060 (N.D. Cal. 2006)……..……………………………………...12 King v. Am. Power Conversion Corp., 181 Fed. Appx. 373 (4th Cir. 2006)……..12 Lectrolarm Custom Sys v. Pelco Sales, Inc., 212 F.R.D. 567 (E.D. Cal. 2002)….17 Lewis v. Ryan, 261 F.R.D. 513 (S.D. Cal. 2009)…………………………………11 Marbury v. Madison, 5 U.S. 137, 180 (1803) ……………………………………10 Phillips v. General Motors Corp., 307 F.3d 1206 (9th Cir. 2002)………………..16 Pueblo of Laguna v. United States, 60 Fed. Cl. 133 (Fed. Cl. 2004)..……………13 Reno v. ACLU, 521 U.S. 844 (1997)…………………………………….……….10 Silvestri v. GMC, 271 F.3d 583 (4th Cir. 2001)……..……………………………12 Treppel v. Biovail Corp., 233 F.R.D. 363 (S.D.N.Y. 2006)………………………13 United States v. Columbia Broadcasting System, Inc., 666 F.2d 364 (9th Cir. 1982)……………………………………………………...16
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United States v. Maxxam, Inc., 2009 U.S. Dist. LEXIS 30734 (N.D. Cal. Mar. 27, 2009)......................................11 United States v. Wilson, 795 F.2d 55 (4th Cir. 1986)……………………………..18 Wood v McEwen, 644 F.2d 797 (9th Cir. 1981)………………………………….17 World Courier v. Barone, 2007 U.S. Dist. LEXIS 31714, 2007 WL 1119196 (N.D. Cal. Apr 16, 2007)……11 Younger Mfg. Co. v. Kaenon, Inc., 247 F.R.D. 586 (C.D. Cal. 2007)……………17 Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)………...12 Statutes 15 U.S.C. § 45………………………………………………………………...........2 18 U.S.C. § 1343……………………………………………………………….......1 18 U.S.C. § 1512………………………………………………………………….18 18 U.S.C. § 1962(c)………………………………………………………………...1 18 U.S.C. § 1962(d) ………………………………………………………………..1 Cal. Code. Civ. Proc. § 425.16……………………………………………………..1 16 C.F.R. Part 255.0…………………………………………………………..........3 Restatement (Second) of Contracts § 352, comment b……………………….......10 Rules Fed. R. Civ. P. 26(b)(1) …………………………………………………………..11 Fed. R. Civ. P. 34(a) ……………………………………………………………...11 Fed. R. Civ. P. 26(c)….……………………………………………………….15, 16 Treatises Moore's Federal Practice - Civil § 37A.10………………………………………..13 8 C. Wright and A. Miller, Federal Practice and Procedure: Civil § 2036……….16
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MEMORANDUM OF POINTS AND AUTHORITIES I. FACTUAL AND PROCEDURAL BACKGROUND A. Procedural History This action, alleging civil violations of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1962(c) and (d), and related state law

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claims, was commenced on January 28, 2010 with the filing of a complaint
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(”Compl.”) in California Superior Court for Los Angeles County. DN-1, Ex. 1.1 On February 24, 2010, Defendants removed the action to United States District Court for the Central District of California on the basis of federal question jurisdiction, DN-1, and filed an Answer, DN-4. On March 22, 2010, Defendants filed a Special Motion to Strike under California’s Anti-SLAPP law, California Code of Civil Procedure § 425.16, automatically staying discovery. DN-9. On April 19, 2010, this Court denied Defendants’ Special Motion to Strike, set this matter for an August 3, 2010 trial, and ordered the parties to meet and confer under Rule 26 regarding discovery matters. DN-23, 24, DN-26. This Court bifurcated and advanced the trial to cover solely the civil RICO claim predicated on extortion, and excluding damages. Id. Following this Court’s grant of partial summary judgment for the Defendants, DN-92, DN-94, Plaintiffs on July 27, 2010 filed a First Amended Complaint (“FAC”), Request for Judicial Notice and Jury Trial Demand. DN-97, DN-98, DN-100. The First Amended Complaint contains detailed allegations of violations of the wire fraud statute, 18 U.S.C. § 1343, as predicate acts of RICO. The case remains bifurcated as to RICO claims only. DN-94 at 53. The Court set a deadline of August 6, 2010 for any motion to dismiss the

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FAC. DN-94 at 53. The Court ordered that it would revisit the issue of further
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References to “DN-__” are to the civil docket in this action.
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discovery after the resolution of a motion to dismiss or expiration of the deadline to file a motion to dismiss. Id. B. Nature of the Case This is a case about conduct on the Internet and in Internet search engines. The case primarily concerns Defendants’ electronic communications through their

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website, ripoffreport.com (the “Website”) and actions in optimizing certain web
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pages for Internet search engines.
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The bifurcated cause of action is a claim for civil violations of RICO predicated on wire fraud. Briefly, the gravamen of Plaintiffs’ civil RICO claims is primarily a pattern of racketeering by the “Ripoff Report enterprise.” See FAC ¶¶9-15. The alleged enterprise uses the wires in interstate commerce in furtherance of a scheme to defraud (the “Content Trolling Scheme”) consisting of soliciting rebuttals, inter alia, through false statements, as replies to negative “Rip-off Reports” and ad hominem complaints against businesses and individuals (“subjects” of the Reports). See FAC ¶¶16-21, 196-246 and passim. Pursuant to the Content Trolling Scheme, the enterprise engages in various undisclosed search engine optimization (“SEO”) practices that have the effect of presenting Google search results about the subjects (including Plaintiffs) in a certain negative manner, FAC ¶¶69-136, unless the enterprise is paid to “stuff” positive content into the HTML for the subjects’ web pages. See FAC ¶¶138-169. The Ripoff Report Enterprise makes false statements that induce subjects to submit rebuttals (which acts to their detriment by refreshing the negative, more prominent, Reports for search engines) and also harms Plaintiffs and other subjects, inter alia, by reason of false statements to the consumer public and failure to disclose paid

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endorsements and verifications of certain companies on the Website, in violation
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of Section 5 of the FTC Act, 15 U.S.C § 45, and the Codes of Federal Regulations
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promulgated thereunder, 16 C.F.R. Part 255.0 et seq.2 See FAC ¶¶183-184 and passim. Plaintiffs allege that Defendants systematically changing the HTML for web pages and disclaim negative reports about Google to attract search engines and maintain high “authority” with Google. FAC ¶¶247-253 and Exs. 24, 25. Plaintiffs allege that the enterprise does so to sell advertising, goods and

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services, including membership in a costly program (the “Corporate Advocacy
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Program” or “CAP”) that promises to change negative Google search results into
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positive search results for paying members. FAC ¶¶138-169. Plaintiffs allege damages, in accordance with the standards of Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008), by reason of the enterprise’s acts of wire fraud in furtherance of the racketeering, including loss of property interests in Plaintiffs’ formerly robust business in brokering real estate transactions, payments to reputation repair consultants, and otherwise. FAC ¶¶288 and at 82-84. C. Relevance of Electronically Stored Information (“ESI”)

The evidence in this action is almost exclusively electronic. Accordingly, the preservation of electronically stored information (“ESI”) is of paramount importance to Plaintiffs. The scope of ESI sought to be preserved is not burdensome. At a minimum, it would consist of the 58 web pages and associated HTML from the Website referenced in the pleadings, and evidence of the changes in Defendants’ server directory structure. See Borodkin Dec. ¶¶10, Ex. 14. These 58 web pages represent less than a tenth of one percent of the over 627,870 web pages containing “RipThe FTC issued new Guides effective December 1, 2009 expressly confirming

that the disclosure requirements for sponsorships and testimonials apply to blogs, Internet message boards and other forms of new media. See http://www.ftc.gov/opa/2009/10/endortest.shtm.
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off Reports” in Defendants’ Website. Borodkin Dec. Ex. 14. Five of these web pages and HTML code concern Plaintiffs directly. See FAC ¶316, Ex. 22. Plaintiffs understand that Defendants emphasize the preservation of the text of user submissions and IP addresses of contributors because the 35 federal actions in which Defendants have previously appeared generally include causes of action

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arising from the content on Defendants’ website and the identities of contributors.
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This action is not like those cases. The gravamen of the claims alleged in this
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action requires preservation of ESI relevant to Defendants’ HTML coding practices (see FAC ¶¶138-195, “Defendants Alter Google Search Results for CAP Members”) and Defendants’ changes in its directory structure (see FAC ¶¶106120, “Defendants’ use of Domain Names To Influence Google Page Ranking”), which are aimed at influencing Google search engine results under recognized principles published in an SEO handbook by Google itself. See FAC ¶74, Ex. 24 (Declaration of Anthony Howard), Ex. 25 (Declaration of Joe Reed). The pleadings allege that Defendants purposefully change how they encode the HTML for the Website’s web pages concerning Plaintiffs and others so as to cause “positive” or “negative” snippets of text to appear in search results yielded by search engine queries on Google and otherwise. See, e.g., Complaint (“Compl.”) at ¶2, ¶3, ¶20, ¶22.D (“Defendants . . . Create ‘META tags’ for rip-off reports, which make the defamatory posts appear higher on the search engines”), ¶24, ¶32, ¶62, ¶96 (“one complainant claims that he ‘came home and googled [Plaintiffs’]s name, and found all these bad reports”). See also First Amended Complaint (“FAC”) at ¶10 (“Xcentric . . . [is] distributing, displaying, publishing, continuously republishing, indexing, and optimizing for the Web such acquired

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and paid, self-produced content to make the content interactive and easily
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searchable by commercial Internet search engines”), ¶19 (“Unbeknownst to the
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victims, . . . [a] rebuttal is likely to make the negative content in a [Rip-off] Report go up in page rank in search engine queries”); ¶21-¶22 (“for a price, [Defendants] will sell . . . the opportunity to change a negative Google search engine result into a positive”), ¶30, ¶33, ¶35, ¶38, ¶¶69-99, ¶¶106-120 (“Defendants’ Use of Domain Names to Influence Google Page Rankings”), ¶¶138-179 (“Defendants Alter

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Google Search Results for CAP Members”), and ¶¶247-253 (“Defendants Falsely
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State that they have never done anything to cause Google to rank their website
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higher in the search results”). Preservation of ESI concerning server directory structures and HTML is thus critical to this action. See Declaration of Joe Reed (“Reed Dec”) at ¶¶6-13, 18-20. D. Plaintiffs’ Efforts To Confirm Defendants’ Preservation of ESI

Discovery was reopened in this case on April 19, 2010, following the end of the automatic discovery stay effected by Defendants’ anti-SLAPP motion. DN-23, 24, DN-26, Declaration of Lisa J. Borodkin (“Borodkin Dec.”) ¶3. Plaintiffs immediately took steps to gain Defendants’ cooperation in preserving relevant ESI. On April 22, 2010, Plaintiffs sent Defendants a written request to preserve ESI. Borodkin Dec. at ¶¶4-6, Ex. 1. Specifically, Plaintiffs’ counsel put Defendants’ counsel on notice that Plaintiffs would seek relevant ESI in the case and that Plaintiffs would seek assurances and certifications to the Court that Defendants’ counsel would instruct Defendants to preserve all ESI “relevant to any allegation in the case”: In particular, Plaintiffs request that Defense counsel immediately instruct Defendants to preserve all ESI (including metadata) relating, without limitation, to CAP, and any allegation in this case, and to be prepared to certify to the Court that such ESI has been preserved. Plaintiffs are not seeking all ESI at this time, simply assurances that no such evidence will be destroyed or spoiled.

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Borodkin Dec. ¶¶4-6, Exhibit 1 at 2. Plaintiffs specifically advised Defendants that the relevant ESI sought would include “HTML source and meta tags regarding title tags before and after CAP”: Plaintiffs do request that Defendants take steps to provide, without awaiting a written request, . . . HTML source and meta tags regarding title tags before and after CAP, SEO policies, and other coding practices. . . . Plaintiffs request that Defendants produce all such ESI in electronic, searchable format, preferable in native format, and cooperate with Plaintiffs under the Sedona Conference Cooperation Proclamation.” Borodkin Dec. ¶6, Exhibit 1 at 2-3. Plaintiffs followed up the request to preserve ESI and discussed preservation at the Rule 26(f) discovery conference in an email dated April 27, 2010. Borodkin Dec. ¶7, Exhibit 2. Defendants’ response was vague, stating it was “not an issue.” Borodkin Dec. ¶8, Exhibit 3. On April 27, 2010, the parties conducted their discovery planning conference pursuant to Federal Rule 26(f)(3) and Local Civil Rule 26-1. Borodkin Dec. ¶¶9-10. Defendants’ comments at the conference gave Plaintiffs cause for concern about the preservation of ESI. Plaintiffs informed Defendants of the need to preserve evidence of all versions of the specific web pages from the Website concerning Plaintiffs and since the litigation was commenced. Borodkin Dec. ¶10. In addition, Plaintiffs informed Defendants that the HTML source code for web pages from the Website, before and after the HTML is changed for CAP members would be relevant to the allegations in the Complaint. Id. Defendants’ counsel, Ms. Speth insisted there was no way to preserve this type of information and maintained that the HTML for web pages is never changed. “Whatever comes in, it is.” Id. Ms. Speth’s comments indicated that Defendants’ concept of “relevance” may be restricted to data contributed by users.
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On May 10, 2010, the parties filed their Joint Rule 26(f) discovery plan. See DN-30, Borodkin Dec. ¶, Exhibit 11, Ex. 4. In the Joint Report, Plaintiffs articulated a narrow subset of relevant ESI. Borodkin Dec. ¶11, Exhibit 4 at 3-4. Defendants stated in their portion of the Joint Report that not all ESI is preserved: “Defendants have agreed to preserve any and all information in their possession which may be relevant to the claims in this case. However, because defendants operate a live/dynamic website which contains millions of unique postings that are constantly being updated, supplemented, and/or changed via the addition of new information, it is not possible for defendants to preserve any snapshots of unknown information which plaintiffs have neither identified not requested.” Borodkin Dec. ¶12, Exhibit 4 at 4. Defendants’ statement in the Joint Report gave

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Plaintiffs additional cause for concern about the preservation of ESI.
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In or around May 2010, Plaintiffs observed significant changes to the
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formatting of the HTML for Rip-off Reports about Plaintiffs. The user contributions had apparently not changed, but the HTML used by Defendants had. See Borodkin Dec. ¶14-16, Exhibits 5-6. In addition, Plaintiffs noticed a change in the Website’s server directory structure (the structure that determines the URL for a web page) since the time the Reports were first posted about Plaintiffs. Borodkin Dec. ¶¶13-17. On March 4, 2010, Defendants’ server directory structure formatted a URL for Report 417493 concerning Plaintiffs of www.ripoffreport.com/reports/0/417/RipOff0417493.htm. Beginning at least in May 2010, Defendants had changed the user directory structure to generate a URL of http://www.ripoffreport.com/Employers/AsiaEconomic-Instit/asia-economic-institute-aei-ef3f4.htm for the same Report. See Borodkin Dec. ¶¶13-17, Exs. 5-6; Reed Dec. at ¶20. In addition, the titles displayed in the Google search results had also changed from “Rip-off Report: Asia Economic Institute, AEI, WorldEcon: Raymond. . .” in
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March 2009 to “Asia Economic Institute, AEI, World Econ Review|Rip-off Report . . .,” after May 2010, indicating a change in the HTML for the web page. See Borodkin Dec. ¶¶15-17; Reed Dec. ¶¶18-20. On May 28 and 29, 2010, Plaintiffs sent emails to Defendants’ counsel regarding the changes and requesting a statement regarding Defendants’ preservation of ESI. Borodkin Dec. at ¶¶18-19, Exs. 6, 8. Defendants’ counsel responded twice on May 30, 2010, again with vague responses, and also stating, “As is true of virtually any website, peripheral parts of the site are always being reviewed and upgraded, so perhaps you’re confused by some cosmetic and other change.” Borodkin Dec. ¶¶20-23, Exs. 7, 10. On June 22, 2010, Plaintiffs served their First Set of Requests for Production of Documents (“RFPs”), specifically including ESI in the definition of “Documents” and identifying 11 discrete, narrowly tailored document requests that include ESI, namely Requests 16, 22, 27, 28, 29, 35, 36 and 37. See Borodkin Dec. ¶¶24-25, Ex. 11. Again, on June 24, 2010, Plaintiffs met and conferred with Defendants’ counsel regarding preservation of ESI. Borodkin Dec. ¶26. On July 14, 2010, Plaintiffs advised Defendants of their intention to seek a Temporary Restraining Order (“TRO”) for preservation of ESI if Defendants’ counsel would not provide a statement as to the steps taken to preserve ESI. Borodkin Dec. at ¶28, Ex. 12. Defendants did not respond. Borodkin Dec. at ¶28. On July 22, 2010, Defendants served their Responses to Plaintiffs First Set of RFPs. Borodkin Dec. at ¶29 and Ex. 13. Defendants objected, inter alia, that none of the ESI sought in Requests 16, 27, 28, 29, 35, 36 and 37 was relevant or calculated to lead to discoverable evidence, notwithstanding that the Requests sought core documents such at HTML and meta tags in accordance with the allegations. Id. Because Defendants claim that such responsive ESI is not relevant, Plaintiffs anticipate that Defendants have no intention of preserving it.
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Plaintiffs are aware that the Magistrate Judge in GW Equity v. Xcentric Ventures, LLS et al. (N.D. Tex. 3:07-cv-00976-O, DN-242, Oct. 8, 2008), made a finding that Defendants’ SQL database automatically overwrites and saves over previous data when changes are made. See Order of October 8, 2008, attached to Reed Dec. at Ex. B at 43 (“Defendants do not dispute that . . . the SQL database saves [changes] directly into the submitted content . . the SQL database Defendants use is simply not designed to duplicate data before revising it.”). This case alleges changes to the HTML for Defendants’ web pages. It is precisely because changes in the HTML may not be visible on the Website that ESI must be preserved. In this case, preservation and protection of data on an SQL database is necessary to evaluate if, when and how particular web pages and their HTML source code have been altered. See Reed Dec. ¶10. If data is overwritten on an SQL database without prior duplication, that data is lost. See Reed Dec. at ¶9. Appropriate preservation measures would be to backup and store source codes, take back end data snapshots, and change logs. See Reed Dec. ¶11. These are relatively low-cost solutions. See id. Defendants frequently argue to Courts that they have handled many cases regarding the Website. Pacer indicates they have appeared in 35 federal actions. Defendants should be sophisticated in appropriate ESI preservation obligations. On July 30, 2010, Plaintiffs requested that Defendants insert a “no index, no follow” meta tag into the HTML for the 5 web pages concerning Plaintiffs. The

The October 8, 2008 Order in GW Equity concerned Plaintiffs motion for

sanctions and was denied in the context of defamation claims concerning the actions of the Defendants’ content monitors. By contrast, here, Plaintiffs seek an order of preservation, and the claim is for Defendants’ preservation of HTML and server directory structure as it relates to Defendants’ deliberate conduct to influence Google search results.
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purpose was to preserve the status quo and mitigate damage to Plaintiffs during the pendency of this action. See Borodkin Dec. ¶30, Ex. 14. Defendants refused. E. Basis for Protective Order Re: Interference With Witnesses Kent Hutcherson, an attorney in Texas, provided a declaration in support of Plaintiffs’ First Amended Complaint, which was filed July 27, 2010. See Borodkin Dec. ¶32, Ex. 15. On July 28, 2010, Plaintiffs received a telephone call and email from Mr. Hutcherson. See Borodkin Dec. ¶¶32-35. Mr. Hutcherson forwarded Plaintiffs’ counsel a letter dated July 28, 2010 sent to him by Defendants’ counsel, Ms. Speth. Borodkin Dec. ¶34, Ex. 16. The letter, inter alia, demanded that he, as a witness, “provide the Asia Economic court with a corrected declaration to include an explanation of the terms of the Settlement Agreement,” and claimed that it was wrong of him to imply that the Communications Decency Act “can be challenged in the courts” because “[t]he CDA is a statute; therefore, any true challenge to its language and effect must be undertaken by Congress, and not by any court.” See Borodkin Dec. ¶35, Ex. 16. Ms. Speth’s July 28, 2010 letter also demanded that Mr. Hutcherson refrain from taking potential future employment adverse to her clients. Id. Part of the very statute that Ms. Speth insists cannot “be challenged in the courts,” the CDA (Communications Decency Act), was struck down as unconstitutional by the United States Supreme Court in Reno v. ACLU, 521 U.S. 844 (1997) (striking down 47 U.S.C. § 223, as overbroad and violative of the First Amendment). In addition to being manifestly incorrect on the doctrine of judicial review, see Marbury v. Madison, 5 U.S. 137, 180 (1803), the authoritative tone of Ms. Speth’s letter and appearance of legal authorities would have a profound chilling effect on lay witnesses. Together with Defendants’ counsels’ consistent threatening of Plaintiffs’ counsel, see Borodkin Dec. ¶¶37-46, and pending motion for sanctions for discovery conduct, Plaintiffs are concerned about the chilling effect of any such
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extrajudicial contact by Defendants’ counsel on witnesses. Defendants demanded to know the names of witnesses Plaintiffs have been speaking to and described such information gathering as “herding cats.” Borodkin Dec. ¶¶37-38. Certain potential expert witnesses have declined to speak with Plaintiffs’ counsel and at least one stated a fear of being sued by Defendants. Borodkin Dec. ¶47. II. THIS COURT HAS THE POWER TO ISSUE THE REQUESTED TRO REGARDING ESI A. Defendants Have a Duty to Preserve ESI Federal courts have liberally and broadly construed a party’s right to discovery, so as to uphold the right to discovery wherever possible. See Fed. R. Civ. P. 26(b)(1)(“Parties may obtain discovery regarding any nonprivileged matter

13

that is relevant to any party’s claim or defense.”). Federal Rule of Civil Procedure
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34(a) provides for the discovery of documents or electronically stored information. Fed. R. Civ. P. 34(a). See Columbia Pictures Indus. v. Fung, 2001 U.S. Dist. LEXIS 97576 at *16 (C.D. Cal. June 8, 2007). Rule 34(a)(1) “is expansive and includes any type of information that is stored electronically,” and “is intended to be broad enough to cover all current types of computer-based information, and flexible enough to encompass future changes and development.” Id. Even before discovery, Defendants have a duty to preserve relevant ESI. See United States v. Maxxam, Inc., 2009 U.S. Dist. LEXIS 30734 at *7 (N.D. Cal. Mar. 27, 2009)(“The duty to preserve relevant evidence can arise even before the commencement of litigation and sanctions may be imposed if Defendants knew or should have known that the evidence destroyed was potentially relevant.”). See also Lewis v. Ryan, 261 F.R.D. 513, 518 (S.D. Cal. 2009) (“Federal courts have recognized a party's duty to preserve evidence when it knows or reasonably should know the evidence is relevant and when prejudice to an opposing party is
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foreseeable if the evidence is destroyed.”); World Courier v. Barone, 2007 U.S. Dist. LEXIS 31714, 2007 WL 1119196 at * 2-*3 (N.D. Cal. Apr 16, 2007) (“courts have extended the affirmative duty to preserve evidence to instances when that evidence is not directly within the party's custody or control so long as the party has access to or indirect control over such evidence”); King v. Am. Power

6

Conversion Corp., 181 Fed. Appx. 373, 378 (4th Cir. 2006) (“If a party cannot
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fulfill this duty to preserve because he does not own or control the evidence, he
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still has an obligation to give the opposing party notice of access to the evidence or of the possible destruction”); Silvestri v. GMC, 271 F.3d 583, 591 (4th Cir. 2001) (“The duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.”). “The preservation obligation runs first to counsel, who has 'a duty to advise his client of the type of information potentially relevant to the lawsuit and of the necessity of preventing its destruction.’" Gordon Partners, et. al. v. Blumenthal, 244 F.R.D. 179, 197-198 (S.D.N.Y. 2007) (emphasis added). Failure to instruct clients of a litigation hold supports a finding of gross negligence in failing to preserve evidence. See Hous. Rights Ctr. v. Sterling, 2005 U.S. Dist. LEXIS 44769 at *10 (C.D. Cal. Mar. 2, 2005) (“lack of a declaration from in-house counsel affirming that the necessity of preserving documents was communicated to employees” was “telling” proof that litigation hold not properly communicated). Once the duty to preserve attaches, a party must "suspend any existing policies related to deleting or destroying files and preserve all relevant documents related to the litigation. This is especially true in cases involving ESI. See, e.g., In

26

re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060, 1070 (N.D. Cal. 2006),
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citing Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)
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("Once the duty to preserve attaches, any destruction of documents is, at a minimum, negligent."). B. The Facts Here Satisfy the 3-Part Test of Capricorn Power Co.

Courts have inherent judicial power to grant injunctive relief to further the purposes of discovery and preserve evidence. In appropriate cases, the Court may

6

issue an order delineating the scope of evidence to be preserved. See 7-37A
7

Moore's Federal Practice - Civil § 37A.10. “Such orders are increasingly routine in
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cases involving electronic evidence, such as e-mails and other forms of electronic communication." Treppel v. Biovail Corp., 233 F.R.D. 363, 370 (S.D.N.Y. 2006), citing Pueblo of Laguna v. United States, 60 Fed. Cl. 133, 136 (2004) (“this court plainly has the authority to issue such orders”). Federal courts in California frequently apply the three-part test articulated in Capricorn Power Co. v. Siemens Westinghouse Power Corp., 220 F.R.D. 429, 43233 (W.D. Pa. 2004), to decide whether a preservation order is warranted: In determining whether to issue a preservation order, courts undertake to balance at least three factors: (1) the level of concern the court has for the continuing existence and maintenance of the integrity of the evidence in the absence of an order directing preservation; (2) any irreparable harm likely to result to the party seeking the preservation of the evidence absent an order directing preservation; and (3) the capability of the party to maintain the evidence sought to be preserved, not only as to the evidence's original form, condition or contents, but also the physical, spatial and financial burdens created by ordering evidence preservation. Columbia Pictures Indus. v. Fung, 2007 U.S. Dist. LEXIS 97576 at *25-*26 (C.D. Cal. June 8, 2007) (granting order of preservation). Plaintiffs have demonstrated circumstances that meet this test. Accordingly, this Court is empowered to grant Plaintiffs’ application. Applying the Capricorn three-part test to the facts and history discussed, the Court should order the

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requested TRO to ensure the preservation of ESI in this matter and prevent irreparable injury and prejudice to Plaintiffs in this case. First, the Court’s concern for the continuing existence and maintenance of the integrity of the ESI in this action should be paramount. In most cases involving Defendants that have come to bar, the defense is ordinarily that conduct is attributable to third-party contributors under the Communications Decency Act, or that changes are not made by content monitors. See, e.g., Reed Dec. ¶8, Ex. B.

8

This case is different. This case concerns Defendants’ HTML coding and SEO
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practices, and expressly alleges that Defendants make changes to the HTML that
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they claim does not “change” Reports, but in fact drastically changes the way search results for web pages containing the Reports appear on the Web. Second, the harm to Plaintiffs from destruction of this ESI in the absence of a court order is irreparable. See Reed Dec. ¶¶9-11. Evidence of historical versions of HTML and the Website’s server directory structure is in the sole possession of Defendants. Plaintiffs believe this is a case of first impression regarding the SEO practices alleged. Therefore, it is not likely that Defendants have taken snapshots of the server directories for the relevant time period based on any other litigation holds. In addition to the modifications made to the website content and HTML coding, Defendants it appears have deleted an entire category of Ripoff Reports, which also bears explaining. See Declaration of Jan Smith ¶18. Defendants’ counsel have stated to Plaintiffs that they will preserve what is “relevant,” but Defendants do not display a reasonable grasp of “relevance.” In their responses to Plaintiffs’ RFPs, Defendants claimed that none of the 11 discrete requests seeking documents, such as metadata and HTML concerning Reports about Plaintiffs, were relevant. See Borodkin Dec. ¶¶25, 29, Exs. 11, 13. Defendants have also repeatedly refused to describe to Plaintiffs the steps they

28

have taken to preserve data, notwithstanding that the Website has been changing,
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and admitted in other cases that they overwrite their SQL database, which contains necessary ESI. See Reed Dec. ¶¶7-11. Were Defendants to destroy or permit destruction of such ESI, Plaintiffs’ case would be irreparably damaged. Third, the requested order is not burdensome. Such precautions as keeping disaster recover backups from being overwritten and maintaining change logs

6

during litigation are relatively low-cost solutions that are provided with all server
7

and database systems. See Reed Dec. ¶ 11. Plaintiffs estimate that the relevant
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4

web pages and HTML are only 58 out of the over 627,870 web pages on the Website. Borodkin Dec. ¶ 30. No significant harm will befall Defendants if they are ordered to preserve the requested ESI pending determination by the Court of the scope of document production. Accordingly, this motion should be granted. Finally, Plaintiffs have requested a “no index, no follow” metatag to be inserted in to the HTML for the five web pages referencing Plaintiffs. The requested meta tag would preserve the status quo of the web pages as they appear on the Website. Reed Dec. ¶21. The meta tags would severely curtail the harm to Plaintiffs caused by future modifications by Defendants to SEO policies. Id. Defendants have not, and cannot, articulate any good reason for not including the meta tag in the HTML for web pages regarding Plaintiffs, as all their legal arguments have historically been confined to the four corners of the user-submitted contents of Reports. None of that would be affected by the requested meta tag. III. “GOOD CAUSE” EXISTS FOR A PROTECTIVE ORDER FOR INTERFERENCE WITH WITNESSES A. Applicable Standards under Federal Rule of Civil Procedure 26(c)

Federal Rule of Civil Procedure 26(c)4 governs the granting of a protective order. Federal Rule of Civil Procedure 26(c)(1) provides in part: The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense,
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A protective order should be granted when the moving party establishes "good cause" for the order and "justice requires [a protective order] to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. . . ." Fed. R. Civ. P. 26(c). Subsection (c) [of Rule 26] underscores the extensive control that district courts have over the discovery process, authorizing courts to

6

make "any order which justice requires to protect a party or person from
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annoyance, embarrassment, oppression, or undue burden or expense" (emphasis
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added). Thus, as Wright and Miller note, "a court may be as inventive as the necessities of a particular case require in order to achieve the benign purposes of the rule." Brulotte v. Regimbal, 368 F.2d 1003, 1004 (9th Cir. 1966). To conclude otherwise would contravene the policy that the Federal Rules should be construed "to secure the just, speedy and inexpensive determination of every action." Fed. R. Civ. P. 1.” See United States v. Columbia Broadcasting System, Inc., 666 F.2d 364, 369 (9th Cir. 1982) (citing 8 C. Wright and A. Miller, Federal Practice and Procedure: Civil § 2036, at 267). “Rule 26(c) . . . was enacted as a safeguard for the protection of parties and witnesses in view of the broad discovery rights authorized in Rule 26(b)”) Id., 666 F.2d. at 368-369. A district court must make a “good cause” analysis in determining whether a protective order is necessary. Phillips v. General Motors Corp., 307 F.3d 1206, 1212 (9th Cir. 2002). "For good cause to exist, the party seeking protection bears the burden of showing specific prejudice or harm will result if no protective order

including one or more of the following: . . . (B) specifying terms, including time and place, for the disclosure or discovery Fed R. Civ. Proc. 26(c)(1).
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is granted." Id, 307 F.3d at 1210; see also Younger Mfg. Co. v. Kaenon, Inc., 247 F.R.D. 586, 588 (C.D. Cal. 2007). In determining whether good cause exists for the protective order, the court must balance the interests in allowing discovery against the relative burdens to the parties and non parties. See In re Coordinated Pretrial Proceedings 669 F.2d 620,

6

623 (10th Cir. 1982); see also Wood v McEwen, 644 F.2d 797, 801-801 (9th Cir.
7

1981). Where a court believes that discovery is sought for an “improper and
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harassing purpose” and where such purpose “clearly outweighs” the minimal need for the very limited amount of information that could be discovered, the court should find “good cause” for the issuance of a protective order. See Lectrolarm Custom Sys v. Pelco Sales, Inc., 212 F.R.D. 567, 573 (E.D. Cal. 2002). In Lectrolarm, the Court conducted a “good cause” analysis and found that the discovery requests propounded by the corporation were unreasonable, duplicative, overly broad and propounded for the improper purpose of harassment and obtaining information to which it clearly was not entitled. Therefore, the Court granted the protective order. Id. at 573. In Columbia Broadcasting System, the Court of Appeals relied on the Catchall of Rule 26(c) to order costs reimbursed to third-party witnesses that had incurred $2.3 million dollars in complying with subpoenas for massive amounts of information in an antitrust investigation of the networks CBS and ABC. The Court of Appeals held that the district court had not properly considered the studio’s application for reimbursement of costs and remanded the summary denial. In making the order, the Court articulated the purpose of the rule as protection for third parties unfairly impacted by litigation. See id. at 372.

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B. Plaintiffs Will Be Prejudiced Unless a Protective Order Issues In this case, good cause exists to prevent Defendants’ counsel from further attempting to procure evidence through extra-judicial means. First, Defendants’ counsel have already contacted a witness and demanded he file a declaration with this Court, even though discovery is currently on hold and the witness is not

6

admitted to file papers with the Court in this judicial District. Such a demand is
7

procedurally incorrect and completely improper. The timing of the demand letter –
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one day after Plaintiffs filed their First Amended Complaint – gives rise to an inference of retaliation. See Borodkin Dec. ¶¶32-34. Second, the tenor and tone of the letter to Plaintiffs’ witness approaches intimidation, even by the definition of the federal witness tampering statute, 18 U.S.C. § 1512.5 In United States v. Wilson, 795 F.2d 55, 59 (4th Cir. 1986), the court instructed the jury that “harass" is defined as "conduct that was designed and intended to badger, disturb or pester for the unlawful purpose or purposes as alleged in the indictment counts." 18 U.S.C. § 1512(d)(1) provides that “Whoever intentionally harasses another person and thereby hinders, delays, prevents, or dissuades any person from . . attending or testifying in an official proceeding; or attempts to do so, shall be fined under this title or imprisoned not more than 3 years, or both.”

(b) Whoever knowingly uses intimidation, threatens or corruptly persuades another person, or attempts to do so, or engages in misleading conduct toward another person, with intent to-(1) influence, delay or prevent the testimony of any person in an official proceeding; . . . . shall be fined under this title or imprisoned not more than 20 years, or both.

18 U.S.C. § 1512.
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Significant harm will be done to Plaintiffs’ case if Defendants engage in further extra-judicial contact with witnesses, which can have an irreversible chilling effect. This is particularly true where the other witnesses are laypeople, who may not be sophisticated with legal contentions asserted by Defendants’ counsel. The danger that Defendants’ counsel may attempt to coerce or influence certain testimony is imminent. The history of Defendants’ counsel of attempting to influence Plaintiffs’ counsel through threats and other improper means is well documented and continuing. See Borodkin Dec. ¶¶39-46; see also Plaintiffs’ pending Motion for Sanctions [DN-87, DN-91] (unopposed with respect to sanctions for discovery conduct). Defendant Magedson has also threatened Plaintiffs’ counsel that she would be the subject of a Rip-off Report and “on the cover” of a book expressing his views of the legal profession. Borodkin Dec. ¶¶39-40. Defendants’ counsel continue to threaten Plaintiffs’ counsel with Rule 11 sanctions on unspecified grounds. Borodkin Dec. ¶¶43, 46. Plaintiffs have already observed the chilling effects of Defendants’ tactics as it has interfered with Plaintiffs’ ability to locate potential expert witnesses willing to testify. See Borodkin Dec. ¶47. Ms. Speth’s July 28, 2010 letter to Plaintiffs’ witness, Kenton Hutcherson, contains gross misrepresentations of the law. Borodkin Dec. ¶¶35-36. Plaintiffs allege that Defendants make similar exaggerations of the law on Defendants’ Website to intimidate susceptible and unsophisticated laypeople from exercising their rights. FAC ¶¶ 254-260. Accordingly, without a protective order for potential and current witnesses, there is a continuing and imminent danger that Plaintiffs’ ability to prepare for trial will be further prejudiced.

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By contrast, Defendants cannot articulate any prejudice they will suffer by being ordered to use conventional and recognized discovery techniques, and not to seek discovery for improper purposes such as harassment. Accordingly, this Court should make a finding that “good cause” exists for issuing a protective order under Rule 26(c) and order that Defendants to refrain from demanding that third-party witnesses create evidence they are not obligated to provide and file such matter with the Court, particularly while discovery is on hold, and to refrain from making improper demands on witnesses to refrain from employment or otherwise attempt to procure, influence or compromise the testimony of witnesses by undue means. IV. CONCLUSION For the foregoing reasons, this application for a Temporary Restraining Order regarding preservation of Electronically Stored Information and for a Protective Order Regarding Interference with Witnesses should be granted in its entirety. DATED: August 3, 2010 Respectfully submitted, By: /s/ Lisa J. Borodkin Daniel F. Blackert Lisa J. Borodkin Attorneys for Plaintiffs Asia Economic Institute LLC, Raymond Mobrez, and Iliana Llaneras

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DECLARATION OF LISA BORODKIN AND CERTIFICATION OF COMPLIANCE WITH LOCAL CIVIL RULES 7-3 AND 7-18 I, Lisa J. Borodkin, declare: 1. I am an attorney at law, duly admitted to practice before all the courts of the State of California and this Honorable Court. I am co-counsel of record for Plaintiffs Asia Economic Institute LLC, Raymond Mobrez and Iliana Llaneras (“Plaintiffs”) in this action. I have first-hand, personal knowledge of the facts set forth below and, if called as a witness, I could and would testify competently thereto. 2. This Declaration is made in support of Plaintiffs’ Ex Parte Application for a Temporary Restraining Order (“TRO”) requiring Defendants to preserve electronically stored data (“ESI”) and for a protective order under Rule 26(c) to prevent Defendants and Defendants’ counsel from interfering with witnesses. A. Preservation Of Electronically Stored Information (“ESI”) 3. I first appeared in this action on April 19, 2010 at the hearing on

Defendants’ Special Motion to Strike under the Anti-SLAPP law. This Court denied the Motion to Strike, set an August 3, 2010 trial date, bifurcated damages and all claims except for RICO predicated on extortion and ordered discovery to proceed. 4. On April 22, 2010 I sent Defendants’ counsel the email attached hereto as Exhibit “1” concerning preparation for the Rule 26(f)(3) discovery plan conference that the parties had agreed to conduct on April 27, 2010. In the part of my April 22, 2010 email concerning “any issues about disclosure or discovery of electronically stored information, including the form or forms in which it should be produced,” I stated that Electronically Stored Information (“ESI”) was likely to yield critical evidence:

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“Much of this case takes place in cyberspace. Therefore, Plaintiffs believe that discovery of electronically stored information (ESI) may be critical and is likely to yield important evidence.” Exhibit 1 at 2. 5. In particular, I put Defendants’ counsel on notice that Plaintiffs would

seek ESI in the case and specifically that Plaintiffs would seek assurances and certifications to the Court that all ESI “relevant to any allegation in the case” would be preserved: In particular, Plaintiffs request that Defense counsel immediately instruct Defendants to preserve all ESI (including metadata) relating, without limitation, to CAP, and any allegation in this case, and to be prepared to certify to the Court that such ESI has been preserved. Plaintiffs are not seeking all ESI at this time, simply assurances that no such evidence will be destroyed or spoiled. Exhibit 1 at 2. 6. Specifically, I advised Defendants that ESI relevant to allegations in the case would include “HTML source and meta tags regarding title tags” and “SEO policies and other coding practices”: Plaintiffs do request that Defendants take steps to provide, without awaiting a written request, emails from and to Mr. Magedson and/or Xcentric and its agents regarding participation in CAP, offers made inviting businesses to join CAP, payments collected or made under CAP, reports generated under CAP, HTML source and meta tags regarding title tags before and after CAP, SEO policies, and other coding practices.” Exhibit 1 at 2-3. 7. Defendants’ counsel did not respond in writing to my April 22, 2010 request for them to instruct Defendants to preserve ESI. On April 27, 2010, I sent Defendants’ counsel another email asking them to be prepared to discuss Defendants’ position of electronic discovery, preservation of evidence, the Sedona
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Conference and other matters in my April 22, 2010 email. A true and correct copy of my April 27, 2010 email is attached hereto as Exhibit “2.” 8. Attached hereto as Exhibit “3” is a true and correct copy of the email response Plaintiffs received from Defendants’ counsel, David Gingras. Mr. Gingras’ April 27, 2010 email states in part, with regard to ESI and the Sedona Conference: “Preservation of electronic evidence is not an issue. Xcentric keeps all of its records pretty much indefinitely, so there’s no issue with respect to putting a hold on something specific because we always put a hold on everything.” Exhibit 3 (emphasis added). 9. 26-1. 10. At the April 27, 2010 discovery plan conference, the parties discussed ESI and electronic evidence preservation. I stated that Plaintiffs want Defendants to preserve evidence of what happens to the HTML source code for web pages from Defendants’ website, Ripoffreport.com (the “Website”) before and after it is changed for members of the Corporate Advocacy Program (“CAP”), as alleged in the Complaint. In addition, I requested that Defendants preserve all versions of the specific web pages from the Website concerning Plaintiffs and discussing the CAP program to preserve a history of any changes made since the litigation was commenced. There are only 5 web pages on the Website discussing Plaintiffs, less than one-hundredth of one percent, of the over 500,000 web pages comprising the Website. Ms. Speth insisted there was no way to preserve this type of information and maintained that the HTML for web pages is never changed. “Whatever comes in, it is,” Defendants’ counsel stated, referring to the HTML for the web pages on the Website. On April 27, 2010, the parties, through counsel, conferred on a discovery plan under Federal Rule of Civil Procedure 26(f) and Local Civil Rule

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11.

On May 1, 2010, I provided Defendants counsel with Plaintiffs’

portions of the Joint Rule 26(f) discovery plan. On May 10, 2010, I received Defendants’ portions of the Joint Rule 26(f) discovery plan. A true and correct copy of the Joint Rule 26(f) report as filed on May 10, 2010 is attached as Exhibit “4.” On the subject of Electronically Stored Information, Plaintiffs’ portion stated, in part, that Plaintiffs seek a narrow, specific, subset of ESI to be preserved regarding Plaintiffs and CAP Members, specifically referencing particular, relevant paragraphs in the Complaint: “Plaintiffs will seek discovery on the HTML source code and meta tags associated with the portions of the ripoffreport.com website relating to posting about Plaintiff and about CAP program participants before and after joining the CAP program, as alleged, inter alia, at paragraph 25 of the Complaint, and the relationship between such HTML source code and meta tags and Defendants’ offer to ‘change[] the negative listings on search engines into a positive along with all the Reports on Rip-off Report,’ as alleged, inter alia, in paragraphs 31, 32 and 62 of the Complaint.” Exhibit 4 at 3-4 (emphasis added). Regarding preservation of the specific, relevant ESI thus identified, Plaintiffs’ portion of the Report stated: “Plaintiffs requested that Defendants’ counsel instruct their clients to preserve all such ESI and associated metadata, particularly metadata history, and to instruct their clients to take steps to retain all backups and safeguards and prevent such ESI and metadata from being over-written, erased, lost or destroyed during the course of this action.” Exhibit 4 at p. 4. 12. Notwithstanding that Plaintiffs’ counsel had given Defendants’ counsel Plaintiffs’ portions of the draft Rule 26(f) Report on May 1, 2010 -including the specific, relevant ESI to be preserved -- nine days previously,
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Defendants’ counsel, on May 10, 2010, admitted that Defendants do not preserve all ESI and feigned ignorance as to what ESI needed to be preserved: “Defendants have agreed to preserve any and all information in their possession which may be relevant to the claims in this case. However, because defendants operate a live/dynamic website which contains millions of unique postings that are constantly being updated, supplemented, and/or changed via the addition of new information, it is not possible for defendants to preserve any snapshots of unknown information which plaintiffs have neither identified not requested.” Exhibit 4 at 4. 13. In or around May 2010, Plaintiffs observed a major change occur to the Google search results for reports from Defendants’ Website (“Rip-off Reports” or “Reports”). 14. A true and correct copy of the first page of Google search results for the query “Raymond Mobrez” retrieved on March 4, 2009 is attached hereto as Exhibit “5.” A portion of the relevant page is reproduced below:

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15.

On March 4, 2009, the first page of the Google search results for the

query “Raymond Mobrez” yielded a search result (consisting of a title, snippets of text and the URL www.ripoffreport.com/reports/0/417/RipOff0417493.htm) in the fourth page rank (position from the top) with the title “Rip-off Report: Asia Economic Institute, AEI, WorldEcon: Raymond. . .” 16. In or about May 2010, the Google search results changed. A true and correct copy of the first page of Google search results for the query “Raymond Mobrez” retrieved on August 3, 2010 is attached hereto as Exhibit “6.” A portion of the relevant page is reproduced below. 17. Since in or about May 2010, the first page of the Google search results for the query “Raymond Mobrez” has yielded a revised search result with the revised URL www.ripoffreport.com/…/asia-economic-institute-aei-ef3f4.htm and pointing to the revised URL http://www.ripoffreport.com/Employers/AsiaEconomic-Instit/asia-economic-institute-aei-ef3f4.htm, with the revised title “Asia Economic Institute, AEI, World Econ Review|Rip-off Report . . .” 18. On May 28, 2010, I sent Defendants’ counsel, Mr. Gingras, an email, a true and correct copy which is attached as Exhibit “7,” stating in pertinent part that Plaintiffs had noticed changes in the Website and were getting concerned about the preservation of HTML and ESI: “We are also very concerned that the RipoffReport.com website seems to be changing. We are concerned electronic evidence may be destroyed. I would like a statement as to what you have done to preserve ESI in this case, and to confer on that.” Exhibit 7 (emphasis added).

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19.

On May 29, 2010, I again sent Defendants’ counsel, an email, a true

and correct copy which is attached as Exhibit “8” again stating concern about Defendants’ reluctance to confirm that ESI was being preserved: “[P]lease give us your statement on ESI. The website is on and off. We need to know what backup tapes, disks, recovery, and otherwise overwriting precautions you are taking to preserve data. I'd prefer not to do this, but we may need to apply ex parte for a TRO if we cannot confirm a statement from you regarding preservation of ESI.” Exhibit 8 (emphasis added). 20. On May 30, 2010 at 7:02 p.m., Defendants’ counsel sent me an email, a true and correct copy of which is attached as Exhibit “9,” stating falsely that I had told Defendants that Plaintiffs “don’t intend to” request discovery “relating to ESI,” that Plaintiffs had not identified ESI to be preserved and otherwise implied that Defendants were not preserving all types of relevant ESI: “You have requested no discovery from us relating to ESI or anything else, and you’ve indicated that you don’t intend to so do. As such, I have no clue what ESI you want us to locate, preserve, or to provide you with a report about. As we have told you from the beginning of the case, original author submissions are always preserved and are never changed. This is true of the reports about AEI, so your perception of an emergency is mistaken. As is true of virtually any website, peripheral parts of the site are always being reviewed and upgraded, so perhaps you’re confused by some cosmetic and other change. However, as I understand it, your case is not based on any of these aspects of the site so I don’t think this is a real concern. Exhibit 9 (emphasis added). 21. Reading between the proverbial lines, Defendants’ counsel’s May 30, 2010 7:02 p.m. email suggests (by negative implication) that parts of the Website that are not author submissions are being overwritten. Defendants -- as they do in
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nearly all legal challenges to their conduct -- erroneously frames the ESI preservation dispute into one solely about user contributions. User contributions are not the only relevant evidence in this case. As Plaintiffs stated in the Complaint, in prior emails and conferences, and in the Rule 26(f) Report, the gravamen of the action is what Defendants put in, add to and subtract from the HTML code – and thus how Defendants determine whether Google search results are “positive” or “negative” for subjects of Rip-off Reports. At 7:25 p.m., I immediately responded by email, “Metatags and HTML source code for the reports at issue in the litigation.” See Exhibit 9. 22. On May 30, 2010 at 10:15 pm. and 10:17 p.m., Defendants’ counsel sent me a second and third email response concerning ESI, true and correct copies of which are attached hereto as “Exhibit 10.” The 10:17 p.m. email stated in a conclusory fashion, “None of this is relevant to this case so we don’t believe you’re entitled to this, but as a matter of course we’ll preserve this anyway.” 23. Neither of Defendants’ May 30, 2010 emails responded specifically to my request to describe what measures Defendants’ attorneys had taken to instruct their clients to preserve ESI. 24. On June 22, 2010, Plaintiffs served their First Set of Requests for Production of Documents on Defendant Xcentric Ventures, LLC (“Xcentric”), a true and correct copy of which is attached as “Exhibit 11.” 25. Plaintiff’s Requests for Production defined “Documents” to include ESI and sought narrowly tailored, particularized categories of ESI, including HTML, meta tags, meta elements and related electronic evidence, as summarized in the table below: Plaintiffs’ First Set of Requests for Production of Documents dated June 22, 2010 Relevant to Preservation of ESI Definitions “’DOCUMENT(S)’ include but are not limited to: files, notes, memoranda, correspondence, or letters of any kind,

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Request 16 Request 22

Request 27
16 17 18 19 20 21 22 23 24 25 26 27 28

Request 28

Request 29

Request 35

Request 36

hand-written notes, bills, ledgers, inter-departmental or office communications, written statements, moving or still photographs, moving or still pictures, diagrams, plans, drawings, specifications, measurements or other descriptions, agreements, contracts records, audio recordings, tapes, compact discs, and computer files in any format and printout thereof, digital media, digital files, backup tapes, discs, information stored on remote servers or drives or in the “cloud” (e.g., Google Docs, DropBox, or other cloud computing and storage services), and any and all forms of Electronically Stored Information (“ESI”). “Document” includes both originals and non-identical copies or copies that contain commentary or notation that does not appear in the original.” “DOCUMENTS that refer or relate to YOUR use of META TAGS on ROR from 2005-present.” “DOCUMENTS that IDENTIFY the HTML, META TAGS, META ELEMENTS, and source code for all web pages displaying reports about PLAINTIFFS at issue in this action.” “DOCUMENTS that refer or relate to any instance of YOU deleting posts on ROR from 2005-present.” “DOCUMENTS that IDENTIFY the HTML, META TAGS, META ELEMENTS, and source code for web pages displaying reports about a representative CAP member after joining CAP.” “DOCUMENTS that IDENTIFY the HTML, META TAGS, META ELEMENTS, and source code for web pages displaying reports about a representative CAP member as they existed before the member joined CAP.” “DOCUMENTS relating to, referring to, or evidencing any actions taken by DEFENDANTS to create, add, remove, edit or alter the TITLE META TAG of reports against members of the CAP, including but not limited to documents evidencing changes in the Web page’s HTML source code.” “DOCUMENTS relating to, referring to, or evidencing any actions taken by Defendants to create, add, remove, edit or alter the DESCRIPTION META TAG of the complaints against members of the CAP, including but not limited to documents evidencing changes
- 9 -

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Request 37

Request 38
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Request 39

Request 40

in the Web page’s HTML source code.” “DOCUMENTS relating to, referring to, or evidencing any actions taken by Defendants to create, add, remove, edit or alter the KEYWORD META TAG of the complaints against members of the CAP, including but not limited to documents evidencing changes in the Web page’s HTML source code.” “DOCUMENTS relating to, referring to, or evidencing any actions taken by Defendants to create, add, remove, edit or alter the TITLE META TAG of the complaints against PLAINTIFF, including but not limited to documents evidencing changes in the Web page’s HTML source code.” “DOCUMENTS relating to, referring to, or evidencing any actions taken by Defendants to create, add, remove, edit or alter the DESCRIPTION META TAG of the complaints against PLAINTIFF, including but not limited to documents evidencing changes in the Web page’s HTML source code.” “DOCUMENTS relating to, referring to, or evidencing any actions taken by Defendants to create, add, remove, edit or alter the KEYWORD META TAG of the complaints against PLAINTIFF, including but not limited to documents evidencing changes in the Web page’s HTML source code.”

26. of ESI. 27.

On June 24, 2010, I met and conferred with Defendants’ counsel on a

number of pretrial issues under Local Civil Rule 16, one of which was preservation On July 12, 2010, this Court granted Defendants’ Motion for

Summary Judgment in part with respect to Plaintiffs’ civil RICO claim predicated on extortion and granted a Rule Motion to dismiss the civil RICO claim predicated on wire fraud with leave for Plaintiffs to replead wire fraud by July 27, 2010. DN94. 28. On July 14, 2010, in an email attached hereto as Exhibit “12,” I again advised Defendants’ counsel of Plaintiffs intention to seek a TRO for preservation of ESI if Defendants counsel would not provide a statement as to the steps taken to
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preserve ESI and prevent the overwriting that Defendants indicated at the April 27, 2010 conference and in the May 10, 2010 Joint Rule 26(f) Report: “On a related note, I believe around the time of the discovery conference we requested a statement under oath regarding Defendants' preservation of electronic evidence. I believe we received the response "that's not an issue," which is not quite the same as a statement under oath committing to preserve evidence. Especially now that we are repleading as wire fraud, we would really appreciate a statement under oath as to your client's efforts to preserve and back up ESI. Perhaps it is not possible to get this without a TRO, but if it truly is not an issue, it may save time and money for all concerned later on. We've already met and conferred on a TRO for preservation of ESI, I believe. Please let me know if you disagree.” Exhibit 12. I received no response to my July 14, 2010 email. 29. On July 22, 2010, Defendants served responses to Plaintiffs’ First Set of Requests for Production, a copy of which is attached as Exhibit “13,” that claimed that responsive ESI sought by Plaintiffs in Requests 16, 27, 28, 29, 35, 36 and 37 was not relevant. 30. On July 30, 2010, Plaintiffs gave notice to Defendants’ counsel of this Application. A true and correct copy of my July 30, 2010 emails is attached as Exhibit “14.” Plaintiffs also requested that Defendants voluntarily agree to insert a “no index, no follow” meta tag into the HTML for the web pages concerning Plaintiffs, both to preserve the status quo and to mitigate Plaintiffs’ damages: “[W]e request that you immediately voluntarily insert a <meta name="ROBOTS" content="NOINDEX,NOFOLLOW"> meta tag on the HTML for the web pages containing reports 417493, 423987, 457433, 502429, 57123. That will preserve the status quo and protect our clients from harm from any future system-wide optimization you may undertake during this litigation.
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Since the meta tag I requested is exclusively in the HTML, that should not affect your ability to claim that reports are not removed or altered.” Exhibit 14. Defendants refused this request, although it would not affect the appearance of the web pages on the Website itself. Id. 31. Based on the history of Defendants’ discovery conduct, Plaintiff anticipates that Defendants will claim that no ESI is “relevant” unless it meets Defendants’ unreasonable, subjective standards, and will neither retain nor produce any ESI relevant to Plaintiffs’ claims, and will again inappropriately move for Summary Judgment claiming, as before, that Plaintiffs have no evidence. See Motion for Sanctions for Discovery Conduct pending before this Court. B. Facts Relevant to Request for a Protective Order for Witnesses 32. On July 28, 2010, I received a telephone call from Kent Hutcherson.

Mr. Hutcherson had provided a Declaration in support of Plaintiffs’ First Amended Complaint. A true and correct copy is attached hereto as Exhibit “15.” 33. 34. Mr. Hutcherson informed me that he had spoken with Defendants’ Thereafter, Mr. Hutcherson forwarded me a letter that Ms. Speth had counsel, Ms. Speth, and that she had accused him of being untruthful. sent him on July 28, 2010. A true and correct copy of the letter I was forwarded is attached as “Exhibit 16.” Ms. Speth’s July 28, 2010 letter, inter alia, demanded that Mr. Hutcherson file another declaration with this Court, and demanded that he refrain from taking certain potential future employment adverse to Ms. Speth’s clients. 35. Among other things, Ms. Speth’s July 28, 2010 letter vigorously castigates Mr. Hutcherson for suggesting that the Communications Decency Act can be challenged in the courts: “You further state that the CDA does not provide absolute justice and our legal system allows business owners to challenge it. . . . you imply that the
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CDA can be challenged in the courts. The CDA is a statute; therefore, any true challenge to its language and effect must be undertaken by Congress, and not by any court. See Noah v. AOL Time Warner, Inc., 261 F. Supp.2d 532, 539 (E.D. Va. 2003), aff’d sub nom. Noah v. AOL-Time Warner, Inc., 2004 WL 602711 (4th Cir. 2004) (“It is not the role of the federal courts to second-guess a clearly stated Congressional policy decision.”). Your attempt to mislead the public into hiring you to file a frivolous lawsuit against Xcentric on the basis that Xcentric’s immunity under the CDA can be “challenged” is based on a faulty legal presumption, which you know to be improper.” Exhibit 16. 36. These misrepresentations of law, and the role of the federal courts in interpreting statutory law, would have a profound chilling effect if made to laypeople. Part of the very statute that Ms. Speth insists cannot “be challenged in the courts,” the CDA (Communications Decency Act), was struck down as unconstitutional by the United States Supreme Court in Reno v. ACLU, 521 U.S. 844 (1997) (striking down 47 U.S.C. § 223, as overbroad and violative of the First Amendment). Ms. Speth’s assertions combine a demonstrated willingness to misrepresent the law – in this case, the doctrine of judicial review, established in Marbury v.Madison, 5 U.S. 137, 180 (1803) -- and an authoritative tone that could mislead laypeople. Plaintiffs are concerned about the chilling effect of any such extrajudicial contact by Defendants’ counsel with witnesses. 37. At a July 20, 2010 conference between Plaintiffs’ counsel and Defendants’ counsel, Ms. Speth and another of Defendants’ counsel, Adam Kunz of Jaburg & Wilk, demanded that I provide the names of all persons who had provided input into the First Amended Complaint or otherwise were interested in potentially asserting similar claims for relief against Defendants. I provided certain names to Defendants’ counsel in the context of a potential motion to add parties.

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38.

On July 20, 2010, Mr. Kunz stated to me, “It’s like herding cats,”

referring to Defendants’ desire to contain all information about potential claims against Defendants through contacting witnesses. 39. 40. On July 20, 2010, Defendant Ed Magedson looked at me and told me On July 20, 2010, Defendant Ed Magedson also approached me that Ripoff Reports happen to everyone, and said “It will happen to you.” physically and told me “You’re going to be on the cover of my book,” which I later came to understand is a book about his dissatisfaction with lawyers. 41. I do not bear any personal animosity towards Mr. Magedson, nor have I ever exhibited any. As my clients and co-counsel are aware, I have repeatedly expressed that I share and respect Mr. Magedson’s passion for First Amendment liberties, particularly on the Internet. 42. 43. However, Plaintiffs have a valid concern regarding the chilling effect Defendants’ counsel have a long history of making threats to of Defendants’ counsel on witnesses. Plaintiffs’ counsel. See, e.g., Plaintiffs’ pending Motion for Sanctions. Defendants counsel repeatedly threaten Plaintiffs’ counsel with a variety of retaliatory actions on unspecified grounds, ranging from a lawsuit in Arizona for abuse of process, a future lawsuit for malicious prosecution, and Rule 11 sanctions, most recently on July 30, 2010. 44. The threats of a lawsuit against Mr. Blackert and me personally were made most recently on July 20, 2010 at a conference between Ms. Speth, Mr. Gingras, Mr. Kunz, Mr. Blackert and myself. 45. On July 20, 2010, Defendants’ counsel offered a release of the future claims for malicious prosecution and abuse of process threatened against Mr. Blackert and me personally if we would effect an immediate settlement of the case between our clients and Defendants for a payment of either $35,000 or $50,000 from our clients to Defendants, which Defendants’ counsel referred to as attorneys’
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fees. The numbers proposed seemed arbitrary and did not seem to reflect actual legal billings, since Ms. Speth proposed $35,000 and Mr. Kunz proposed $50,000. Similarly, the settlement amount proposed previously has been a round number of $25,000. 46. Prior to July 20, 2010, I previously requested Defendants’ counsel, in writing, to provide the specific bases for their threatened Rule 11 sanction petition, and to refrain from threatening legal action for malicious prosecution, given that this action has not terminated in their favor and there is currently no good-faith basis for such a claim. Defendants’ counsel have persisted in making threats of Rule 11 sanctions, without specifying the basis, most recently on July 30, 2010, when I called to confer on this application. 47. When I was seeking a witness qualified in search engine optimization (“SEO”) to give testimony or speak with me about this action, I had great difficulty. One wanted to participate but his attorneys would not let him. Another would not speak with me, as I was informed by counsel. Another expressed being afraid of being sued by Defendants for being a neutral expert witness. 48. Given Ms. Speth’s July 28, 2010 letter to Mr. Hutcherson, and Defendants’ history of making veiled and explicit threats to Plaintiffs’ counsel, Plaintiffs have a bona fide concern that contact by Defendants’ counsel with other witnesses outside of formal discovery methods may be intimidating, and may have a chilling effect on potential participation in this action. 49. This Application is made following the conferences of counsel that occurred on April 27, 2010, June 24, 2010, and July 20, 2010, and other communications between counsel dated April 22, 2010, April 27, 2010, May 27, 2010, May 29, 2010, May 30, 2010, and July 14, 2010, and by contacting Defendants’ counsel pursuant to L.R. 7-3 and notice of this ex parte application pursuant to L.R. 7-19 on July 30, 2010.
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I declare under penalty of perjury under the laws of the State of California and the United States of America that the foregoing is true and correct. Executed this 3rd day of August, 2010, in Los Angeles, California. /s/ Lisa J. Borodkin Lisa J. Borodkin

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Exhibit T

Case Case 2:11-cv-01426-GMS Document 166-1 Filed 08/04/10 Page 1 of 10 439 ID 2:10-cv-01360-SVW -PJW Document 108 Filed 12/10/12 Page 430 of Page #:3323

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

Maria Crimi Speth, (Admitted Pro Hac Vice) mcs@jaburgwilk.com JABURG & WILK, P.C. 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 (602) 248-1000 David S. Gingras, CSB #218793 David.Gingras@webmail.azbar.org Gingras Law Office, PLLC 4072 E Mountain Vista Dr. Phoenix, AZ 85048 Tel.: (480) 668-3623 Fax: (480) 248-3196 David.Gingras@webmail.azbar.org Attorneys for Defendants Xcentric Ventures, LLC and Edward Magedson UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ASIA ECONOMIC INSTITUTE, LLC, et al., Plaintiffs, v. Case No: 2:10-cv-01360-RSWL-PJW [DISCOVERY MATTER] DEFENDANTS’ OPPOSITION TO PLAINTIFFS’ EX PARTE TRO APPLICATION

15 16 17 18 19 20 21 22 23 24 25 26 27 28 I.

XCENTRIC VENTURES, LLC, et al., Defendants. INTRODUCTION

Unfortunately, despite this court’s admonitions, this case continues tumbling deeper and deeper down the proverbial rabbit hole. As explained briefly herein, the current matter before the court (Plaintiffs’ Ex Parte TRO Application) is factually and legally groundless and it should be denied in its entirety. DEFENDANTS’ OPPOSITION TO EX PARTE TRO APPLICATION 1
10297-70/MCS/MCS/819201_v1

2:10-cv-01360-SVW-PJW

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

Plaintiffs’ Ex Parte Application violates the motion practice rules of this Court because there is no urgency justifying proceeding Ex Parte. Indeed, Plaintiffs’ pleading reflects that the parties have been discussing the ESI issue for months. Also, because there is no urgency whatsoever as to any matter raised in the application, Defendants respectfully request that the court delay any consideration of Plaintiffs’ application for at least 21 days from today in order to permit Plaintiffs an opportunity to withdraw the pleading following the Motion for Rule 11 Sanctions that was served today but not filed. II. ARGUMENT

Before discussing the specific points in Plaintiffs’ application, Defendants note that despite requesting a temporary restraining order, Plaintiffs have completely failed to address or discuss the legal standards for such relief; “The traditional equitable criteria for granting preliminary injunctive relief are (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if the preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases).” Johnson v. California State Bd. Of Accountancy, 72 F.3d 1427, 1430 (9th Cir 1995) (quoting Dollar Rent A Car v. Travelers Indem. Co., 774 F.2d 1371, 1374 (9th Cir. 1985). “Alternatively, a court may issue a preliminary injunction if the moving party demonstrates ‘either a combination of probable success on the merits and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in his favor.’ ” Martin v. Int'l Olympic Comm., 740 F.2d 670, 675 (9th Cir. 1984) (quoting William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 526 F.2d 86, 88 (9th Cir. 1975)). Here, Plaintiffs’ application contains no discussion whatsoever of the crucial question—whether their newly-repleaded wire fraud claim has a strong likelihood of success. The omission of this analysis is hardly surprising given the breathtaking lack of merit in this case. For instance, Plaintiffs’ FAC accuses Defendants of engaging in wire DEFENDANTS’ OPPOSITION TO EX PARTE TRO APPLICATION 2
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fraud by, inter alia, designing the Ripoff Report website in such a way that certain pages are hard to print. See FAC (Doc. #96) ¶¶ 56–58. This is not a serious or valid claim. Neither does the TRO application show that “serious questions are raised and the balance of hardships tips sharply in [Plaintiffs’] favor.” This is so as to the three areas covered by Plaintiffs’ application as explained herein. a. Plaintiffs Are Not Entitled To A TRO re: ESI At least four reasons exist for denying Plaintiffs’ TRO request as it related to electronically stored information. First, the law already imposes a duty on all parties to preserve relevant evidence, including ESI. See generally Keithley v. HomeStore.com, Inc., 2008 WL 3833384 , *2 (N.D.Cal. 2008) (awarding $148,269.50 in fees and costs after litigant failed to effect “litigation hold” on relevant information). The current TRO requested by Plaintiffs is wholly duplicative of duties which already are imposed on both Plaintiffs and Defendants. As such, the requested relief is completely unnecessary. Second, Plaintiffs fail to recall that on June 24, 2010, they asked for and received (over Defendants’ objection) an order from this court staying discovery in this matter as to all issues except for their extortion claim which has, of course, been resolved in favor of Defendants on summary judgment. The reason Plaintiffs requested this order was

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obvious—they knew their allegations in this case were 100% factually frivolous, and they knew that Defendants would promptly expose this fact if discovery was not stayed. For that reason, Plaintiffs requested and obtained a discovery stay in order to prevent Defendants from exonerating themselves. Because Plaintiffs have actively sought to avoid discovery, there is no equitable basis to conclude they are now entitled to emergency injunctive relief which has the effect of lifting the very stay which Plaintiffs demanded. Third, there is simply no need of any kind for a TRO or any other relief from this court because all (or substantially all) of the “ESI” Plaintiffs are seeking is freely available DEFENDANTS’ OPPOSITION TO EX PARTE TRO APPLICATION 3
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to them at any time by merely viewing the Ripoff Report website. Specifically, Plaintiffs allege that their wire fraud claims are based on 58 web pages “referenced in the pleadings” including certain unspecified HTML and “meta tags”. Given Plaintiffs’

whack-a-mole litigation strategy (wherein a legal or factual theory advanced by Plaintiffs will be promptly defeated by Defendants and then replaced with a new but equally groundless theory), Defendants are, for the most part, unaware of exactly what 58 specific pages are involved. Nevertheless, the fact remains that Plaintiffs are free to view the Ripoff Report website at any time, capture these 58 pages (including the HTML associated with those pages), and in doing so, they will obviate any need for Defendants to “preserve” these pages. Fourth, Plaintiffs’ TRO request is unnecessary because as explained in the Declaration of Justin Crossman submitted herewith, Defendants do keep and maintain all data in the database, even when changes are made. As such, there is no imminent risk that any information will be lost if immediate injunctive relief is denied. b. Plaintiffs Are Not Entitled To A TRO Requiring Defendants To Insert A “NoFollow” Tag Into Reports About Plaintiffs In an effort to “slip one past” the court, Plaintiffs ask the court for an order requiring Defendants to insert certain HTML code into the reports about Plaintiffs including “ROBOTS.txt” and “NoFollow” tags. These tags have the effect of removing the pages from search results. See Crossman Decl. ¶ 17. Although Plaintiffs’ application briefly mentions this request, there is no explanation of the legal or factual basis for the request. This is hardly surprising because what Plaintiffs are seeking is nothing less than an unconstitutional prior restraint on speech. As explained in the California Supreme Court’s seminal case of Balboa Island Village Inn, Inc. v. Lemen, such prior restraints are presumptively unconstitutional and may only be entered after a trial on the merits in which the speech at issue has been found to be defamatory. See Lemen, 40 Cal.4th 1141, 1157–58 156 P.3d 339, 332–33 (Cal. 2007) DEFENDANTS’ OPPOSITION TO EX PARTE TRO APPLICATION 4
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(recognizing “The traditional rule of Anglo-American law is that equity has no jurisdiction to enjoin defamation[]” but concluding that a post-trial injunction against defamation was permissible); see also 2 Smolla & Nimmer on Freedom of Speech § 15:57 (discussing Lemen and propriety of pre-trial injunctive relief). c. Plaintiffs Are Not Entitled To A TRO re: “Interference With Witnesses” In keeping with their scheme of making groundless requests solely to increase the costs of this meritless action, Plaintiffs falsely allege that Defendants have improperly “interfered” with a witness named Kenton Hutcherson. extremely simple. Mr. Hutcherson is a Texas-based attorney who currently represents and has in the past represented parties in litigation against Ripoff Report, including one case filed in the U.S. District Court for the District of Arizona styled Xcentric Ventures, LLC v. William Stanley, et al., 2:07-cv-00954-GMS (the “Stanley litigation”). In short, the Stanley The facts of this issue are

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litigation was a case in which Xcentric (as plaintiff) sued several defendants for engaging in a series of illegal cyber-attacks against the Ripoff Report website. In addition to injunctive relief, Xcentric eventually obtained a judgment awarding damages of $479,740.51 against one defendant who was not represented by Mr. Hutcherson. Based on evidence that Mr. Hutcherson’s client was involved in these attacks, Xcentric entered into a settlement agreement in which Mr. Hutcherson’s client agreed to pay $100,000 in damages to Xcentric. As part of this agreement, which is attached as Exhibit 8 to Plaintiffs’ FAC (Doc. #96-8) Xcentric also promised to monitor any new reports about Mr. Hutcherson’s client in order to verify that the complaint was created by an actual customer. After entering into this agreement, Xcentric inadvertently allowed two new reports to be posted about Mr. Hutcherson’s client without the pre-publication confirmation required by the settlement agreement.

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In order to cure or avoid a default as a result of the inadvertent failure to verify the author of the posting was a customer, Xcentric decided it would be appropriate to remove the two reports about Mr. Hutcherson’s client despite its general policy of never removing reports. Bizarrely, these events (which had no effect whatsoever on Plaintiffs) form a substantial part of Plaintiffs’ wire fraud allegations because Plaintiffs allege that Defendants falsely represent that they “do not remove reports” from the Ripoff Report website when, on one occasion, they did so for the reports about Mr. Hutcherson’s client based on the unusual circumstances of that mater. On July 27, 2010, Mr. Hutcherson submitted a declaration (Doc. #96-12) describing these issues in support of Plaintiffs’ First Amended Complaint. His declaration was misleading in that he did not explain the full circumstances of the matter. Defendants subsequently learned that Mr. Hutcherson also issued a press release on July 28, 2010 (attached hereto as Exhibit A and also available here: http://pdf.pr.com/press-release/pr252020.pdf) in which he boasted about his involvement in this matter and implied— falsely—that he had successfully negotiated the removal of negative information from the Ripoff Report site for his client as part of the client’s settlement agreement with Xcentric. Mr. Hutcherson also made specific false statements about the material elements of the settlement agreement as follows: On May 15, 2009, Kenton Hutcherson resolved a legal dispute between his client and Xcentric Ventures, LLC. As a part of the terms of the settlement agreement, Xcentric Ventures LLC agreed to prevent future submissions related to Hutcherson's client from appearing on the Ripoff Report website. Exhibit A (emphasis added). Based on Mr. Hutcherson’s disappointing decision to make false statements about the Stanley litigation settlement, Defendants immediately contacted Mr. Hutcherson and demanded that he withdraw his press release and provide a new declaration to this court which corrected the seriously misleading nature of his first DEFENDANTS’ OPPOSITION TO EX PARTE TRO APPLICATION 6
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declaration. To date, other than promptly forwarding correspondence from Defendants to Plaintiffs’ counsel, Mr. Hutcherson has ignored all communication from Defendants on this issue. No part of Defendants actions vis-à-vis Mr. Hutcherson are improper. Again, it is important to note that the primary basis for Defendants’ demands to Mr. Hutcherson was not the declaration submitted to this court, but rather those demands were focused on the false statements contained in a press release created and distributed by Mr. Hutcherson. To the extent any statements in the declaration submitted to this court by Mr. Hutcherson may be protected by litigation privilege, that privilege does not give Mr. Hutcherson license to issue press releases which contain false and misleading statements of fact for the purpose of inducing new clients to hire him to commence new litigation against Xcentric. Such conduct is a direct violation of Mr. Hutcherson’s ethical duties as an attorney and may result in Defendants taking legal action against Mr. Hutcherson in the future if appropriate. What is particularly ironic about Plaintiffs request is that they are urging this Court to prevent Defendants from attempting to obtain truthful declarations from Mr. Hutcherson while they are in constant communication from Mr. Hutcherson and are obtaining and using misleading declarations from him. When Plaintiffs seek a declaration from a witness, it is presumably acceptable, but when Defendants seek a declaration from a witness, Plaintiffs argue it is witness tampering. In short, Plaintiffs are not entitled to use this litigation as both a sword in which to solicit and distribute false statements and a shield in which to prevent Defendants from responding to those statements in a lawful manner. In terms of Plaintiffs argument that “Defendants’ tactics … [have] interfered with Plaintiffs’ ability to locate potential expert witnesses willing to testify,” Mot. At 19:17– 19, this assertion is unequivocally and demonstrably false. As reflected in Exhibit B

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hereto, Plaintiffs have already retained and disclosed an expert witness named Joe Reed who has prepared a “report” on various issues:

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Mr. Reed also submitted a declaration in support of Plaintiffs’ TRO request. See Doc. #102 (Declaration of Joe Reed). As such, it is manifestly false for Plaintiffs to argue, as they expressly do, that Defendants’ actions have impaired Plaintiffs’ ability to locate a suitable expert. It should cause serious concern to this court for Plaintiffs to continue making such knowingly false representations to the court without any apparent regard for their duty of honesty and candor. Defendants respectfully request that the court admonish Plaintiffs that such practices are unacceptable and enter sanctions accordingly.

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III.

CONCLUSION

For the reasons stated above, Plaintiffs’ Ex Parte TRO Application is entirely without merit and it should be denied. DATED this 4th day of August, 2010. JABURG & WILK, P.C.

/s Maria Crimi Speth Maria Crimi Speth Attorneys for Defendants

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

CERTIFICATE OF SERVICE I hereby certify that on August 4, 2010 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: Ms. Lisa Borodkin, Esq. Mr. Daniel F. Blackert, Esq. Asia Economic Institute 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Attorneys for Plaintiffs

And a courtesy copy of the foregoing delivered to: Honorable Patrick J. Walsh U.S. Magistrate Judge

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/s/Maria Crimi Speth

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