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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. Case No.: 11-CV-1426-GMS PLAINTIFF’S RESPONSE TO DEFENDANT LISA BORODKIN’S MOTION FOR MORE DEFINITE STATEMENT

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Plaintiff XCENTRIC VENTURES, LLC (“Plaintiff” or “Xcentric”) respectfully submits the following Response to Defendants LISA BORODKIN’s (“Ms. Borodkin”) Motion For More Definite Statement (Doc. #35). I. PREFATORY REMARKS

This case is a textbook example of an action for malicious prosecution. As alleged in a simple, narrative, and straightforward manner, Xcentric’s Complaint (Doc. #1) describes how the defendants, including Ms. Borodkin, wrongfully participated in a sham litigation which was resolved in Xcentric’s favor in June 2011. Xcentric’s Complaint here contains only three substantive claims: 1.) Wrongful Commencement of Civil Proceedings; 2.) Wrongful Continuation of Civil Proceedings; and 3.) Aiding and Abetting Tortious Conduct. Because Ms. Borodkin was not involved in the underlying action when it first began, the only claims presented against her are the second and third causes of action which relate to her conduct after joining the case.
RESPONSE TO MOTION FOR MORE DEFINITE STATEMENT

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As explained in the Complaint, the underlying California proceeding was a sham on multiple levels. It was a sham because the plaintiffs in that action, Defendants RAYMOND MOBREZ, his wife ILIANA LLANERAS, and their company ASIA ECONOMIC INSTITUTE, LLC (collectively, the “Mobrez Defendants”) manufactured a totally false and totally groundless federal “racketeering” case against Xcentric which falsely accused Xcentric of engaging in extortion and wire fraud, among other things. Separate and apart from that important fact, the case was also a sham for multiple other reasons, not the least of which is this—despite demanding millions of dollars in damages, discovery revealed that during its nine years of existence the Mobrez Defendants’ so-called business—the “Asia Economic Institute”—had total revenues of $0 and total profits of $0. Put simply, the Asia Economic Institute was itself nothing more than an empty shell; it never engaged in any business of any kind, nor did it even attempt to conduct any business of any kind. Standing alone, because the claims

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presented in the underlying action generally required proof of actual damages, this fact (of which the Mobrez Defendants were clearly aware) would have proved fatal to their claims even if the action had not been based on deliberately manufactured allegations. As explained in ¶¶ 44–48 of Xcentric’s Complaints, even if Ms. Borodkin was somehow unaware that the California proceeding was groundless when she first appeared in the case on April 19, 2010, any colorable claim of ignorance vanished less than three weeks later at the deposition of her client Mr. Mobrez on May 7, 2010. Despite knowing, at least as of May 7, 2010, that the entire case was a sham, Ms. Borodkin disregarded her legal and ethical obligations and continued to actively and aggressively pursue the case as long as possible. Along the way, Ms. Borodkin repeatedly violated court orders,

repeatedly made false statements to the court, and generally took every possible action she could to prolong the case and to ensure the maximum possible damage to Xcentric. These facts are articulated in the Complaint in a simple and straightforward manner, and they are adequate to inform Ms. Borodkin of the nature of this action. As such, her motion should be denied. 2
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II.

ARGUMENT

Ms. Borodkin’s motion begins with a reasonably accurate discussion of the standards for a Rule 12(e) motion, but she dramatically overstates the narrow application of that rule which “is quite restricted” in its scope. Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1376 (3d ed.). As the Wright & Miller treatise explains, a Rule 12(e) motion is not an appropriate substitute for a Motion to Dismiss under Rule 12(b)(6); “If the movant believes the opponent’s pleading does not state a claim for relief, the proper course is a motion under Rule 12(b)(6) even if the pleading is vague or ambiguous. Moreover, even if the pleading is so sketchy that it cannot be construed to show a right to relief, the proper attack is by a motion under Rule 12(b)(6) rather than Rule 12(e).” Id. In addition, although courts have broad discretion when

evaluating a Rule 12(e) motion, care must be used to ensure that the motion is not an attempt to unnecessarily delay and complicate the action. See id. (cautioning, “the net result of granting a Rule 12(e) motion simply may be an increase in the time and effort expended by the litigants in refining the pleadings, with little accomplished in terms of circumscribing the scope of discovery or defining the issues.”) In other words, “Given the liberal pleading standard set forth in Rule 8(a), Rule 12(e) motions are disfavored.” Murungi v. Tex. Guar. Sallie Mae, 646 F.Supp.2d 804, 811 (E.D.La. 2009). In addition, a Rule 12(e) motion is not a proper method for

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attempting to dispose of the merits of a claim. See One Industries, LLC v. Jim O’Neal Distributing, Inc., 578 F.3d 1154, 1160 (9th Cir. 2009) (cautioning, “We encourage district courts to avoid resolving merits issues, especially fact-sensitive questions, on Rule 12(e) motions.”) Rather than serving as a pseudo-Motion to Dismiss, a Rule 12(e) motion should generally be denied where any imprecision or ambiguity in the Complaint can be resolved through subsequent discovery. See Wright & Miller § 1376, supra (explaining, “many cases have denied Rule 12(e) motions on the ground that the information requested was properly the subject of the discovery process ….”) (citing extensive authority for premise). 3
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With these points in mind, at its core Ms. Borodkin’s motion essentially begins by arguing that civil claims for malicious prosecution are subject to the heightened “pleading with particularity” standards of Rule 9(b). Building on that assumption, the motion contends that the Complaint fails to provide sufficient detail as to the claims presented. Ms. Borodkin cites no authority for this premise and this is clearly not the law. As an elementary matter of civil procedure, except for those certain matters enumerated in Rule 9, a Complaint is not required to contain a microscopic recitation of every possible aspect of the defendant’s wrongful conduct. Rather, “Rule 8 marks a

notable and generous departure from the hyper-technical, code-pleading regime of a prior era,” and the rule “does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009) (emphasis added) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Ms. Borodkin’s motion cites no case in which a heightened pleading standard was applied in a civil action for malicious prosecution. While it appears no Arizona case has ever answered that specific question either way, the Ninth Circuit has expressly rejected a higher pleading requirement in the related context of actions for malicious prosecution arising from a failed criminal case. See Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002) (finding claims for false arrest and malicious criminal prosecution were not subject to the heightened pleading requirements of Rule 9(b), while acknowledging that meritless claims may be weeded out via alternative tools such as motions under Rule 12(e) or Rule 56). The same logic applies here. Rather than examining Xcentric’s Complaint under the strict particularity standards of Rule 9(b), the disposition of the instant motion should turn on whether Xcentric’s claims against Ms. Borodkin are sufficiently pleaded to satisfy Rule 8’s basic requirements. If they are, then Ms. Borodkin’s motion should be denied and any doubts or ambiguity in Xcentric’s claims can be addressed in subsequent discovery and, if appropriate, in a later motion under Rule 56. 4
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a. The Claims Against Ms. Borodkin Are Legally Sufficient As noted above, Xcentric’s Complaint contains only three claims, and of these, only two are asserted against Ms. Borodkin: 1.) wrongful continuation of civil proceedings, and 2.) aiding and abetting tortious conduct. Ms. Borodkin’s motion does not appear to dispute the legal sufficiency of Xcentric’s third cause of action, and in any event this claim is appropriately asserted here. See Chalpin v. Synder, 220 Ariz. 413, 424, 207 P.3d 666, 677 (App. 2008) (expressly holding that aiding and abetting tort claim may be properly asserted against attorney who assists client in a prior malicious civil proceeding). With regard to Xcentric’s second cause of action, on pages 9–10 of her motion, Ms. Borodkin argues that Arizona does not recognize the tort of wrongful continuation of legal proceedings, and that as such she “is entitled to fair notice of whether Xcentric intends to pursue a malicious prosecution claim against her, or whether Xcentric is attempting to argue for Arizona to recognize a new legal theory.” Mot. at 10:4–5. This argument misstates the law. Xcentric is not advocating for the creation of a new legal theory because the tort of wrongful continuation of civil proceedings already exists under Arizona law. Indeed, the wrongful continuation theory is specifically

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recognized by the Revised Arizona Jury Instructions, Civil, 4th ed.; Intentional Torts 19 (providing for liability where the defendant “initiated or took active part in the prosecution of a … [civil action] … .”) (emphasis added). As if this was not clear enough, the wrongful continuation theory is also expressly recognized by comment ‘c’ to Section 674 of the Restatement (explaining, “As in the case of criminal prosecutions, 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.”) (emphasis added). Clearly, Arizona law recognizes this tort, and Ms. Borodkin has received fair notice that she is being sued under this existing theory. Because Xcentric’s second cause 5
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of action is clearly permitted under Arizona law, the next issue is whether the Complaint contains sufficient factual allegations to state that claim. b. The Claims Against Ms. Borodkin Are Factually Sufficient After expressing confusion as to Xcentric’s legal theory, Ms. Borodkin’s motion contains page after page attacking the factual allegations of Xcentric’s Complaint as “convoluted, self-contradictory, and insufficient to put her on notice of the nature of the claims against her.” Mot. at 2:8–9. Again, this argument is largely based on the

erroneous assumption that Arizona law does not recognize liability for an attorney who wrongfully continues a groundless and malicious civil action. Insofar as Xcentric can discern, the factual portion of Ms. Borodkin’s motion focuses on two alleged defects in the Complaint. First, assuming (incorrectly) that

Arizona law only permits liability against lawyers who wrongfully commence groundless litigation, Ms. Borodkin argues that Xcentric has failed to allege sufficient facts to state a viable claim because Ms. Borodkin was not involved in the underlying proceeding when it began, thus she could not be liable for wrongful commencement. As noted above, this argument can be easily rejected because it is simply incorrect as a matter of law— assuming the other elements are proven, by knowingly continuing to participate in a groundless proceeding after becoming aware that the case was groundless, Ms. Borodkin may be liable just as if she had participated in the case from its inception. As explained in Section 674 of the Restatement and as outlined in further detail in Arizona’s jury instructions, in order to prevail here under a “wrongful continuation” theory, Xcentric must establish three basic elements: 1.) that Ms. Borodkin took “an active part in the initiation, continuation or procurement of civil proceedings” against Xcentric; 2.) that Ms. Borodkin acted without probable cause and with “malice” (i.e., that she acted “primarily for a purpose other than that of securing the proper adjudication of the claim in which the proceedings are based”); and 3.) that the underlying case was resolved in Xcentric’s favor. Of course, the fact that a final judgment on the merits was granted in Xcentric’s favor as to all claims is dispositive of the third element as well as 6
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the first half of the second element. See Restatement (Second) of Torts § 674 cmt. ‘g’ (explaining three primary elements of tort and noting, “the invalidity of the claim is conclusively established by its unsuccessful prosecution and cannot be relitigated in an action brought under the rule stated in this Section.”) Paragraphs 48–64 of Xcentric’s Complaint sufficiently allege that Ms. Borodkin took an active part in the continuation of the underlying California action, and Ms. Borodkin’s motion does not seriously dispute her understanding of that part of Xcentric’s case. As such, the only significant remaining issue is the question of malice which is

pleaded in the Complaint, see Compl. ¶¶ 84, 91, and which can also be properly inferred from the groundless nature of the underlying case and the dishonest tactics employed by Ms. Borodkin throughout the proceeding; “Malice ‘may range anywhere from open hostility to indifference. [Citations] Malice may also be inferred from the facts establishing lack of probable cause.’” Soukup v. Law Offices of Herbert Hafif, 39 Cal.4th 260, 293, 139 P.3d 30, 52, 46 Cal.Rptr.3d 638, 664 (Cal. 2006) (emphasis added) (applying California law and noting that an action for malicious prosecution may lie where even a single claim in a multi-claim action is maliciously asserted) (quoting Grindle v. Lorbeer, 196 Cal.App.3d 1461, 1465–66, 242 Cal.Rptr. 562 (1987)). Without belaboring every specific detail in the Complaint, the facts here demonstrate that less than three weeks after appearing in the California action on April 19, 2010, Ms. Borodkin became aware (by virtue of admissions made during her client’s deposition on May 7, 2010, and as subsequently explained to her in a letter from Xcentric’s counsel on May 11, 2010 which is attached to Xcentric’s Complaint as Exhibit E) that the entire action was factually and legally groundless. This conclusion was so obvious that even Ms. Borodkin’s own co-counsel, Defendant DANIEL BLACKERT (“Mr. Blackert”) acknowledged that “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.” Compl. ¶ 78. Despite that admission, Mr. Blackert and Ms. Borodkin both subsequently declined to withdraw from the case, 7
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although Mr. Blackert later vanished and stopped participating in the case in or around August 2010. These facts are simple, clear, understandable, and they are more than sufficient to properly allege Ms. Borodkin’s liability under a wrongful continuation theory. At this early stage, Rule 8 does not require Xcentric to provide a comprehensive forensic analysis of more than 4,000 pages of pleadings, orders and exhibits from the original California action, nor is Xcentric obligated to recite the exact time, place, and manner of each and every wrongful act, event, or occurrence that Ms. Borodkin committed during the 13 months she participated in the case. As long as the Complaint contains a “short and plain statement of the claim showing that the pleader is entitled to relief,” then all of these issues are appropriate subjects of later discovery, not a Rule 12(e) motion. In addition to setting forth sufficient facts to establish Xcentric’s second cause of action, the Complaint also alleges that Mr. Mobrez and Ms. Llaneras were engaged in unlawful conduct (i.e., the malicious prosecution of the underlying California action), that Ms. Borodkin was aware that her clients were engaging in unlawful conduct (based on her knowledge as of May 7, 2010 that her clients had lied and that their business had $0 revenues and $0 damages), and that she provided substantial assistance and encouragement to them during the course of their conduct (by, among other things, seeking reconsideration of the summary judgment ruling as to the RICO/extortion claim, by filing multiple groundless Rule 56(f) motions, in one instance less than two hours prior to a summary judgment hearing, by filing a First Amended Complaint which was factually and legally groundless, and by repeatedly making false statements of fact to the court). The Complaint alleges that the Mobrez Defendants commenced the underlying California “solely for improper purposes”, some examples of which are enumerated in ¶ 72. Nothing more is required to sufficiently allege the aiding and abetting tort as

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described in the Revised Arizona Jury Instructions, Civil, 4th ed.; Intentional Torts 23 (describing elements of tort), and Xcentric’s Complaint provides more than fair notice of that claim. 8
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c. Additional Comments re: Xcentric’s Complaint Is “Unintelligible” On pages 13–15 of her motion, Ms. Borodkin engages in a hair-splitting argument contending that Xcentric’s Complaint is “unintelligible” because it describes an “extortion” claim which Ms. Borodkin suggests was not actually present in the underlying action. This is so because according to the motion, the actual claim at issue was “attempted extortion” not “extortion”. Even if this hyper-technical argument was factually accurate (which it is not), it is unclear what purpose this argument serves in the narrow context of Rule 12(e). Obviously, each and every claim in the underlying California action, however they were labeled or denominated, was resolved in favor of Xcentric on summary judgment, and in this case, Xcentric contends that each and every claim such was groundless. As such, it is simply irrelevant to this case whether the prior action included a claim of actual extortion or merely attempted extortion; the nominal title of that one claim is totally immaterial to the substance or validity of Xcentric’s claims in this case.1 d. Additional Comments re: Specificity of Allegations/“Shotgun/Puzzle Pleading” On page 8–15 of her motion, Ms. Borodkin relies heavily on cases such as Teamsters Local 617 Pension & Welfare Funds v. Apollo Group, Inc., 633 F.Supp.2d 763 (D.Ariz. 2009) (“Apollo I”) for the principle that Xcentric’s Complaint is a “puzzle pleading” which fails to offer a clear factual explanation of Xcentric’s claims. As noted at the outset of this response, Ms. Borodkin’s argument is based largely on the notion that Xcentric’s malicious prosecution claims are subject to the heightened pleading requirements of Rule 9(b). This was an important factor in the Apollo I case because unlike this case, Apollo I involved securities fraud claims which were within the scope of Rule 9(b)’s higher standards.
1

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The term “extortion” was specifically discussed by the district court when it granted summary judgment in Xcentric’s favor as to that claim. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054, *2 (C.D.Cal. 2010) (ordering, “Defendants’ Motion for Summary Judgment is GRANTED IN PART as to the third and fourth causes of action under RICO, to the extent those claims are based on the alleged predicate acts of extortion or attempted extortion.”) (emphasis added).

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Due to the presence of those unique types of claims, the Apollo I court noted that the pleadings were required to contain far more precision than Rule 8 would normally dictate; “In addition to satisfying Rule 9(b), a securities fraud plaintiff must meet the [Private Securities Litigation Reform Act of 1995]’s ‘exacting pleading requirements.’” Teamsters Local 617, 633 F.Supp.2d at 784 (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 2504, 168 L.Ed.2d 179 (2007) (noting, “The PSLRA requires a heightened pleading standard for allegations regarding misleading statements and omissions that is similar to the heightened pleading standard required by Rule 9(b).”). If this case involved claims of securities fraud, then Ms. Borodkin’s citation to Apollo I might be appropriate. However, because Rule 9(b) does not apply here, neither does Apollo I. Furthermore, the district court’s decision in Apollo I was

subsequently reconsidered and substantially revised in Apollo II, rendering Ms. Borodkin’s reliance on Apollo I even less appropriate. See Teamsters Local 617 Pension & Welfare Funds v. Apollo Group, Inc., 690 F.Supp.2d 959 (D.Ariz. 2010) (“Apollo II”) (granting reconsideration of dismissal of certain claims in Apollo I, and finding that the higher pleading standards of Rule 9(b) did not apply to other claims in that case). Once again, because Xcentric’s claims are not subject to the heightened pleading requirements of Rule 9(b), Ms. Borodkin’s demand for extreme specificity is not appropriate. This is particularly true as to Ms. Borodkin’s assertion that because the Complaint makes references to “Defendants” in various places, she is somehow incapable of understanding or differentiating her own conduct from that of the other parties. See Mot. at 8:6–10. Even assuming arguendo that Ms. Borodkin was not aware of the exact actions of her co-defendants, the remedy for this situation is not found in Rule 12(e). Instead, Rule 8(b)(5) expressly permits any defendant to answer a Complaint by pleading lack of knowledge or information, if appropriate. Because Rule 8 does not require Ms. Borodkin to admit allegations if she is unaware as to their truth, there is no need to require Xcentric to break its allegations down into a more personalized form at this stage. Ms. Borodkin may respond to the allegations to the best of her knowledge and belief. 10
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e. Additional Comments re: Merits Ms. Borodkin’s motion raises two other primary arguments generally disputing the merits of the Complaint. As noted above, these arguments should be made in a motion under Rule 12(b)(6), not Rule 12(e). First, Ms. Borodkin implies that the Complaint fails to state a claim as to her because it “does not contain allegations as to why the ten causes of action in the California were purportedly groundless … .” Mot. at 12:16–17. This argument seems to imply that because only the RICO/extortion claim was fabricated from whole cloth, the remaining claims were not groundless and therefore could not support a malicious prosecution action. This argument is incorrect. In two separate rounds of summary judgment briefing, the district court issued detailed and lengthy orders (53 pages and 14 pages, respectively) which found that each and every claim in the case was groundless for various reasons. See 2010 WL 4977054 (C.D.Cal. 2010) and 2011 WL 2469822 (C.D.Cal. 2011). Rule 8 does not require

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Xcentric to repeat the factual minutiae of these orders in its Complaint and, once again, any ambiguity or questions Ms. Borodkin may have about the exact nature of Xcentric’s claims can and should be addressed in discovery, not by nit-picking each and every word, sentence, and paragraph of a reasonably well-pleaded Complaint. Finally, Ms. Borodkin argues that Xcentric’s third cause of action (aiding and abetting) fails to state a viable claim against her because, according to her narrow view, that claim is based solely on Ms. Borodkin’s knowledge that the Mobrez Defendants were engaged in “wrongful conduct” which she interprets as referring only to the wrongful commencement of the underlying case as opposed to wrongful continuation of it. As explained above, this conclusion is based on an erroneous understanding of the malicious prosecution tort which provides for liability in cases of both wrongfully starting civil litigation, and wrongfully continuing civil litigation. Thus, even assuming that Ms. Borodkin did not know that her clients were engaged in unlawful conduct when she first appeared on their behalf in the California 11
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action, this does not mean that Xcentric’s third cause of action fails. Rather, assuming Xcentric can establish (as it has alleged), that Ms. Borodkin subsequently became aware of her clients’ unlawful actions (i.e., wrongfully continuing the case), then Ms. Borodkin may be liable under a theory of aiding and abetting that conduct as long as the other elements of that tort are established. See Chalpin, 220 Ariz. at 424 (explaining, “[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.”) III. CONCLUSION

The allegations in Xcentric’s Complaint are sufficient to explain the factual basis for its claims against Ms. Borodkin. Any ambiguity as to specific details or theories of the case should be resolved in discovery, not with a Motion for More Definite Statement. As such, Ms. Borodkin’s motion 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. Krystal M. Aspey, 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 /s/David S. Gingras

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