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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 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 et al., Defendants. Plaintiff XCENTRIC VENTURES, LLC (“Plaintiff” or “Xcentric”) respectfully submits the following Response to Defendants LISA BORODKIN’s (“Ms. Borodkin”) Motion to Dismiss for Lack of Personal Jurisdiction (Doc. #34). I. ARGUMENT

Case No.: 11-CV-1426-GMS PLAINTIFF’S RESPONSE TO DEFENDANT LISA BORODKIN’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION, ETC.

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As the Court is aware, Ms. Borokin’s co-defendants have previously moved to dismiss for lack of personal jurisdiction (Doc. #18; filed 9/30/11), and Xcentric has separately opposed that motion (Doc. #26; filed 10/12/11). Many of Ms. Borodkin’s arguments are duplicative of issues which have already been addressed in Xcentric’s opposition to the Mobrez Defendants’ motion, so these points will be addressed as succinctly as possible here. a. Ms. Borodkin Expressly Aimed Tortious Conduct At Arizona Ms. Borodkin’s motion begins by correctly noting that Xcentric does not allege that she is subject to general jurisdiction in Arizona. As such, both sides agree that the dispositive question is whether specific jurisdiction exists. Both sides also agree that
RESPONSE TO DEFENDANT LISA BORODKIN’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

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Xcentric bears the burden of establishing the first two prongs of the specific jurisdiction test; i.e., showing 1.) Ms. Borodkin expressly aimed and/or purposefully directed her conduct at Arizona and 2.) that this action arises from that conduct. Ms. Borodkin begins her argument by contending that Xcentric has failed to satisfy its burden from an evidentiary standpoint because, “A plaintiff cannot ‘simply rest on the bare allegations of its complaint, but rather is obligated to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.” Mot. at 4:15–18

(quoting Amba Marketing Systems, Inc. v. Jobar Int’l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)). Ms. Borodkin also argues that “[t]he plaintiff cannot simply rest on the bare allegations of its complaint’ if controverted by evidence incorporated into defendant’s motion.” Mot. at 4:12–13 (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004)). This argument ignores the fact that Xcentric filed a verified Complaint, which has the same effect as an affidavit. See Wozniak v. Arpaio, 2011 WL 4949240, *2 (D.Ariz. 2011) (explaining, “a verified complaint may be used as an affidavit opposing a motion if it is based on personal knowledge and sets forth specific facts admissible in evidence … .”) (citing Schroeder v. McDonald, 55 F.3d 454, 460 (9th Cir. 1995)). Here, Xcentric’s Verified Complaint sets forth detailed allegations which have been verified by Xcentric’s manager, Edward Magedson. Furthermore, Ms. Borodkin has not submitted an affidavit nor has she provided any other evidence controverting the jurisdictional facts alleged in Xcentric’s Verified Complaint. As such, Xcentric has not failed to “come forward with facts, by affidavit or otherwise, supporting personal jurisdiction,” but instead has presented the necessary sworn evidence to give rise to a finding of personal jurisdiction over the named Defendants. Turning to the merits of her motion, Ms. Borodkin correctly notes that Xcentric contends a finding of specific jurisdiction is supported by a previous malicious prosecution action filed by Xcentric in Magedson v. Whitney Information Network, Inc., 2009 WL 499776 (D.Ariz. 2009). In Whitney, the District Court held that by filing a 2
RESPONSE TO DEFENDANT LISA BORODKIN’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

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groundless lawsuit against Xcentric, an Arizona limited liability company, in Florida, the defendants (the former plaintiffs and attorneys in the Florida action) were properly subject to personal jurisdiction in Arizona. Unwilling to concede any point, Ms. Borodkin argues that Whitney is “distinguishable on its facts” for only one reason—in the underlying Florida action in Whitney, Xcentric unsuccessfully argued that it was not subject to personal jurisdiction in Florida. Although the Florida District Court initially agreed with Xcentric and held that personal jurisdiction over Xcentric was lacking, that holding was later reversed by the Eleventh Circuit Court of Appeals in an unpublished decision, 199 Fed.Appx. 738, 2006 WL 2243041 (11th Cir. 2006). After remand, the Florida district court subsequently concluded that by merely operating a website wherein a third party posted statements which allegedly defamed the plaintiff, Xcentric was properly subject to personal jurisdiction in Florida. See Whitney Info. Network, Inc. v. Xcentric Ventures, LLC, 2008 WL 450095, *4 (M.D.Fla. 2008). Ms. Borodkin suggests that because Xcentric unsuccessfully challenged personal jurisdiction in the Florida action in Whitney before filing its malicious prosecution action against Whitney here in Arizona, the Whitney case is somehow distinguishable from the present action because Xcentric did not raise lack of personal jurisdiction in the prior California litigation. Ms. Borodkin’s attempt to distinguish these two otherwise identical cases defies logic. The District Court’s decision in Whitney made clear that jurisdiction in Arizona over the defendants in the malicious prosecution action was proper because it was alleged that (1) the defendants engaged in wrongful conduct targeted at plaintiffs; (2) defendants knew plaintiffs were residents of Arizona; and (3) defendants knew that the harm they were causing would be felt primarily in Arizona. Magedson v. Whitney Information Network, Inc., 2009 WL 499776, *2 (D.Ariz. 2009). The District Court’s only mention of Xcentric’s motion to dismiss for lack of jurisdiction in the Florida case was merely as one of the bases for the allegation that the Whitney defendants knew that the harm they 3
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caused would be felt in Arizona. Id. The Whitney Court did not base its finding of personal jurisdiction on Xcentric’s motion to dismiss in the Florida case. The fact that Xcentric, after having lost its earlier motion to dismiss in the Florida Whitney action, did not move to dismiss based on lack of personal jurisdiction in the California action, does not make this case distinguishable from the malicious prosecution action filed by Xcentric against the defendants in Whitney. Xcentric did not choose the forum in either action; rather the plaintiffs in both of those cases chose the forum. Xcentric chose to move to dismiss the California action on the merits, and that decision has no bearing whatsoever on the analysis of whether the Defendants in this action are subject to personal jurisdiction in Arizona when they knowingly caused harm to Arizona residents. For these reasons, the Whitney case was not substantively different from this action. Both cases involved groundless and malicious lawsuits filed against Xcentric in another state which were resolved in Xcentric’s favor, leading to a subsequent malicious prosecution action here in Arizona against the former plaintiffs and their attorneys. Undersigned counsel represented Xcentric in both matters, and indeed, the Complaint in this action was based in large part upon the complaint in Whitney. Of course, each case must be resolved according to its own unique facts, and Xcentric concedes that this Court is not bound by Judge Campbell’s finding of jurisdiction over the defendants in Whitney. At the same time, the facts of both cases were virtually identical,1 and there has been no meaningful change in the law governing personal jurisdiction since the February 2009 denial of the Motions to Dismiss in Whitney. As such, the same result should occur here as occurred in Whitney. b. Xcentric v. Bird Has No Application Here The majority of Ms. Borodkin’s motion is based on yet other matter in which Xcentric was involved—Xcentric Ventures, LLC v. Bird, 683 F.Supp.2d 1068 (D.Ariz.
1

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Xcentric contends that the Defendants’ unlawful conduct involved in this action is far more egregious than the conduct in Whitney. 4
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2010). That case involved a defamation action brought by Xcentric against a Washington-state based attorney and blogger named Sarah Bird who wrote an online article entitled “Anatomy of a Ripoff Report Lawsuit”. Ms. Bird’s article purported to offer readers a “how-to” guide for suing Xcentric in a manner that would defeat Xcentric’s immunity under the Communications Decency Act. Because the article made untrue statements about Xcentric, Xcentric sued Ms. Bird and her employer in Arizona for defamation. After the case was removed from state to federal court, Ms. Bird filed a Motion to Dismiss for lack of personal jurisdiction which argued, in part, that she did not know Xcentric was located in Arizona and that as a result, her actions were not specifically targeted at this state. Judge Silver granted Ms. Bird’s motion over Xcentric’s objection. In her ruling, Judge Silver explained her reasoning as follows: “Plaintiffs have not alleged any facts to support a connection between Arizona and the article. Plaintiffs do not allege that the article mentioned Arizona or Arizona residents, or that Defendants took any affirmative steps to direct the article or website to an Arizona audience.” Bird, 683 F.Supp.2d at 1073. Although Xcentric respectfully disagreed with the accuracy of these conclusions, Judge Silver nevertheless dismissed the case, finding, “Plaintiffs in this case have alleged no connection between the allegedly defamatory article and the forum other than that the article was about Plaintiffs and Defendants knew Plaintiffs resided in Arizona.” Id. at 1075. Xcentric appealed the dismissal. However, that appeal was voluntarily dismissed after Xcentric and Ms. Bird settled the matter, so the propriety of Judge Silver’s ruling was never reviewed. In light of this unique background, the facts of Bird are simply not comparable to those at issue here. Bird was primarily a defamation case, and Judge Silver determined that even though Ms. Bird personally created the article which allegedly defamed Xcentric, that conduct was not sufficient to establish personal jurisdiction over her in Arizona. Because Xcentric’s action against Ms. Borodkin is not a defamation case, the holding in Bird is of little or no application here. 5
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On the other hand, as already noted the facts of Whitney are virtually identical to the facts of here—both cases involved malicious prosecution claims; both cases arose from groundless lawsuits commenced against Xcentric in another state, and both cases were intended to cause, and actually did cause, severe financial damage to Xcentric within the State of Arizona. In a well-reasoned decision, Judge Campbell concluded that those facts were sufficient to establish personal jurisdiction in Arizona under applicable Ninth Circuit precedent, and the logic of that ruling applies equally to Xcentric’s claims against Ms. Borodkin. In sum, although Judge Campbell’s decision in Whitney occurred prior to Judge Silver’s decision in Bird, the different conclusions can be attributed to the substantially different facts of each case. Notwithstanding the similarities between this case and Whitney, Ms. Borodkin argues that a different result should be reached based on the Arizona Supreme Court’s decision in Bils v. Bils, 200 Ariz. 45, 22 P.3d 38 (2001). Like this case, Bils involved an action for malicious prosecution filed in Arizona arising from a prior legal proceeding in California. However, unlike this case, the underlying California action in Bils was not a sham lawsuit targeting an unwilling Arizona resident. On the contrary, the first legal proceeding in Bils was a probate action that was voluntarily filed in California by the plaintiff, Willy Bils. See Bils, 200 Ariz. at 46 (explaining, “The dispute arose out of the probate of their mother’s estate initiated by Willy in a California court.”) (emphasis added). Apparently unhappy with the outcome of the California probate case which he had commenced himself, Mr. Bils subsequently brought a malicious prosecution action in Arizona against his brother and his brother’s attorney. The Arizona Supreme Court easily concluded that these facts could not support jurisdiction in Arizona because: “Calder is a far cry from what we have here. Willy Bils was an active, willing

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participant in a will contest in California … . These defendants did not aim anything at Arizona. The only connection Arizona has to this case is that the plaintiff is a resident of Arizona.” Bils, 200 Ariz. at 47. 6
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This case bears no similar to Bils for one obvious reason—Xcentric did not voluntarily commence the prior lawsuit in California; Ms. Borodkin’s clients did. To

suggest that Xcentric was a “voluntary and willing participant” in the case is categorically untrue. Far from being a willing participant, Xcentric was dragged

involuntarily into the sham proceeding in California, and sought to have the action resolved on the merits by filing an immediate Motion for Summary Judgment which Ms. Borodkin aggressively resisted and further sought to delay by filing two separate lastminute motions seeking relief under Rule 56(f), both of which were denied. Ms.

Borodkin took these actions even though she knew at that time the entire case was a sham. Ms. Borodkin’s actions were purposefully directed at Arizona, they were intended to wrongfully force Xcentric to change its business practices in Arizona, and they caused substantial financial harm to Xcentric in Arizona. These facts are identical to Whitney and they are simply not comparable to the facts in Bils. c. This Action Arises From Ms. Borodkin’s Forum-Related Activities On pages 11–12 of her Motion, Ms. Borodkin suggests that Xcentric has failed to meet the second prong of specific jurisdiction because it has not shown that this action arises from her forum-related activities. Ms. Borodkin further argues that in Whitney Judge Campbell mistakenly held that the “but for” standard applied to the second prong of specific jurisdiction; i.e., “But for the Florida Action, Plaintiffs would not have brought this lawsuit.” Whitney, 2009 WL 113477, * 3. To support her position, Ms. Borodkin claims that the only wrongful conduct attributed to her is “litigation tasks taken in the California Action[]” and she contends that “All of Xcentric’s alleged damages are fees and costs it voluntarily incurred in California, litigating the California Action.” Mot. at 12:8–9 (emphasis added). These points are both incorrect and largely irrelevant. First, as a factual matter, Xcentric has already explained that Ms. Borokin’s unlawful actions caused it to involuntarily incur nearly $100,000 in attorney’s fees and costs in Arizona. See Affidavit 7
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of Edward Magedson (Doc. # 26-1; filed 10/12/11) at ¶¶ 6–8. This amount does not include other fees and costs that Xcentric also paid to local counsel in California. See id. ¶ 7. Second, as a legal matter and as Xcentric previously noted on page 6 of its response (Doc. #26) to the Mobrez Defendants’ Motion to Dismiss, personal jurisdiction is not limited to cases where the defendant physically entered the State of Arizona; “purposeful availment is satisfied even by a defendant ‘whose only “contact” with the forum state is the “purposeful direction” of a foreign act having effect in the forum state’.” Whitney, 2009 WL 113477, *2 (quoting Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)); see also Calder v. Jones, 465 U.S. 783, 790, 104 S.Ct. 1482, 1487 (1984) (establishing rule that “An individual injured in California need not go to Florida to seek redress from persons who, though remaining in Florida, knowingly cause the injury in California.”) This is not a case where the defendant has been sued for “untargeted negligence” or other actions outside of Arizona which had no impact in Arizona. Very much to the contrary, and as was true in Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 233 F.3d 1082 (9th Cir. 2000), this action involved conduct which primarily occurred outside of Arizona but which directly and intentionally targeted at Xcentric in Arizona and which was specifically intended to cause harm to Xcentric in Arizona. Indeed, the clear goal of the California action prosecuted by Ms. Borodkin was nothing less than the complete destruction of Xcentric’s Arizona business. But for that failed attempt, this action would never have been brought. Nothing more is required to satisfy the second prong of specific jurisdiction. See Bancroft, 223 F.3d at 1088 (measuring second prong under a “but for” standard and concluding, “This requirement is met here. But for the letter to NSI, which under the NSI dispute resolution procedures forced B & M to choose between bringing this suit and losing the use of its website, it is clear that B & M would have no need for a judicial declaration of its right to use masters.com.”) 8
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d. No Conflict Exists With California Law As was true of the Mobrez Defendants, Ms. Borodkin strenuously argues that allowing Xcentric to prosecute this action in Arizona would conflict with California’s sovereignty because she contends that this action is based on a series of recorded telephone conversations which were allegedly made in violation of California Penal Code § 632. This tired argument is not based in fact, and while Xcentric regrets that the truth continues to be so casually disregarded, a few short comments are needed to hopefully bring this issue to a close once and for all. The relevant facts are extremely simple. As alleged in Paragraph 26 of Xcentric’s Complaint, in April and May 2009, Mr. Mobrez placed a series of seven telephone calls to Xcentric’s primary telephone number in Arizona; (602) 359-HELP (4357). A table of these calls is shown below:

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TABLE OF CALLS 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 Length Min 3.5 1.0 2.9 2.6 2.2 .5 16.5

Of these seven calls, six were automatically recorded by Xcentric’s telephone system. The only call not recorded—#2 in the above list—was only one minute in length (per Mr. Mobrez’s telephone bills). In the prior California action, Xcentric explained its belief that Call #2 was not recorded because the recording process only began after an incoming caller reached a live person, and in order to reach a live person, callers were required to navigate through a series of several different menus (i.e., “Please press #1 to reach customer service,” etc.). 9
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On average, that process takes longer than one minute to complete, so it appears that during Call #2, Mr. Mobrez disconnected the call before he spoke to Mr. Magedson, hence the call was not recorded. Of course, the table of calls shows that Mr. Mobrez called back one minute later, and that call (lasting 2.9 minutes) was recorded, as were each of the other five calls. Of the six recorded calls (#1 and 3–7), two of the calls—#3 and #6—were simply voicemails left by Mr. Mobrez. Contrary to Ms. Borodkin’s endless protests about the illegal nature of these recordings, the district court specifically found that recorded voicemails do not violate California Penal Code § 632; “Voice mails would not fall within the prohibitions of California Penal Code § 632 because voice mails are necessarily recorded (and expected to be so) and therefore do not constitute ‘confidential communications.’ Two of the recordings at issue are of voice mails that Mobrez left for Magedson.” Asia Economic Institute, 2010 WL 4977054, *11 n. 11. The remaining four recordings might have otherwise implicated Penal Code § 632 but for one simple fact which Ms. Borodkin has continuously failed to recognize—Mr. Mobrez’s wife, Ms. Llaneras, testified that she was secretly listening in during three of the calls. This crucial fact was established by the declarations of both Mr. Mobrez and Ms. Llaneras, attached to Xcentric’s Complaint in this matter as Exhibits C and D, respectively. By definition, California Penal Code § 632 only prohibits the recording of “confidential communications” which the statute defines as “any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes … any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.” Cal. Pen. Code § 632(c) (emphasis added). Obviously, any caller who leaves a voicemail knows that their message is being recorded, so as the California District Court already held, the two voicemails left by Mr. Mobrez are not within the scope of this section at all. 10
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Furthermore, because Mr. Mobrez previously testified that he knew his wife, Ms. Llaneras, was secretly listening to three of the calls (#4, 5, and 7), Cal. Pen. Code § 632(a) did not apply to those calls because Mr. Mobrez knew those discussions were being “overheard” and therefore were not “confidential communications”. Thus, the facts here establish that Cal. Pen. Code § 632 was not violated (indeed, the law was not even implicated at all) by five of the six recorded calls. This is so because calls #3 and #6 were simply voicemails and calls #4, 5 and 7 were not confidential communications because Ms. Llaneras was secretly listening to the calls. These facts are, and have always been, entirely undisputed, yet Ms. Borodkin continues to falsely complain that all of the recordings were illegal. Of course, Xcentric acknowledges that one single call—the first—was not a voicemail and was apparently not overheard by Ms. Llaneras. As such, although this recording was completely legal under both Arizona law and federal law, it may have violated Penal Code § 632. However, this does not mean the first recorded call would be inadmissible even if this action was pending in California. As Xcentric has explained ad nauseum and as the California district court already agreed, even if a recording has been made in violation of Section 632 it may always be used to impeach a witness who has committed perjury. See Frio v. Superior Court, 203 Cal.App.3d 1480, 1497, 250 Cal.Rptr. 819, 829 (2nd Dist. 1988) (explaining that even if a call is recorded illegally, “the evidentiary sanction of section 632, subdivision (d), cannot be construed so as to confer upon a testifying witness the right to commit perjury.”) Because the first recording was only offered for impeachment of Mr. Mobrez’s false testimony, even if this case was pending in California, the recording was and is admissible to impeach Mr. Mobrez. See Asia Economic Institute, 2010 WL 4977054, *12 (noting that regardless of Penal Code § 632, “In the context of the present motion, Defendants seek to introduce the tape recordings only to impeach Plaintiffs’ accounts of the conversations between Mobrez and Magedson. At a minimum, the recordings are admissible for that limited purpose.”) 11
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In sum, contrary to Ms. Borodkin’s argument, nothing about this case conflicts in any way with California law. Of the six recorded calls, California Penal Code § 632 unquestionably does not apply in any way whatsoever to five of the six recordings. As to the single remaining call which might otherwise implicate Section 632, it would nevertheless be admissible in any court in California or elsewhere for the purposes of impeachment. As such, there is simply no merit to Ms. Borodkin’s argument that

prosecuting this action in Arizona would conflict with California’s sovereignty. e. Additional Comments Ms. Borodkin’s arguments regarding venue contain no new substance beyond the arguments already made by the Mobrez Defendants to which Xcentric has already responded. As such, no further discussion of those matters is necessary, and Xcentric incorporates by reference its response to those arguments previously made to the Court. Finally, with respect to Ms. Borodkin’s request for sanctions under 28 U.S.C. § 1927, this request is based on her fallacious argument that the recorded phone calls were unlawful, and that undersigned counsel has acted unethically by disagreeing with that conclusion. As explained above, Ms. Borodkin’s position was, and still is, completely incorrect. Her request for sanctions deserves no further response. II. CONCLUSION

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For the reasons stated herein, Ms. Borodkin’s Motion to Dismiss for Lack of Personal Jurisdiction (Doc. #34) should be denied. DATED November 14, 2011. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorneys for Plaintiff

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CERTIFICATE OF SERVICE

I hereby certify that on November 14, 2011 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: Hartwell Harris, Esq. LAW OFFICE OF HARTWELL HARRIS 1809 Idaho Avenue Santa Monica, CA 90403 Attorney for Defendants Raymond Mobrez Iliana Llaneras and Asia Economic Institute, LLC John S. Craiger, Esq. David E. Funkhouser III, Esq. Quarles & Brady LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 Attorney for Defendant Lisa J. Borodkin 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

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/s/David S. Gingras

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