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BOSTWICK & JASSY IIT GARY L. BOSTWICK, Cal. Bar No, 79000

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JEAN-PAUL JASSY, Cal. Bar No. 205513 KEVIN L. VICK, Cal. Bar No. 220738 a J 12400 Wilshire Boulevard, Suite 400 Los Angeles, California 90025 4 Telephone: 310-979-6059 Facsimile: 3 1 0-3 l4-840 I
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Attomeys for Plaintiff SWAZI ELKANZI TAYLOR
SUPERIOR COURT OF THE STATE OF CALIFORNIA

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FOR THE COUNTY OF LOS ANGELES
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SWAZI ELKANZI TAYLOR, an individual,
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Case No,

8C476847
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COMPLAINT FOR:
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vs,

VIOLATION OF ARTICLE I, SECTTON
AND ARTICLE I, SECTION 9 OF TFIE CALIFORNIA CONSTITUTION I

OF THE LTNITED STATES CONSTITUTION

I4 STATE BAR OF THE STATE OF CALIFORNIA, and JAYNE KIM, in her
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capacity as lnterim Chief Trial Counsel of the State Bar of the State of California, and DOES

l-100, inclusive,
Defendants.

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VIOLATTON OF THE DUE PROCESS CLAUSE OF THE FOURTEENTH AMENDMENT OF THE LINITED STATES CONSTITUTION AND ARTICLE I, SECTION 7 OF THE CALIFORNIA CONSTITUTION;

DECLARATORY RELIEF:
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INruNCTIVE RELIEF; VIOLATIONS OF 42 U.S,C. 1983; AND
Q

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vroLATroNS oF cAL. CIV. CODE

$ 52.1

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PlaintiffSWAZI ELKANZI TAYLOR. ("Plaintiff') alleges INTnOOUCTION

as

follows:

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1)

This lawsuit challenges the constitutionality of Senate Bill 94 ("SB 94"), codified in,

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without limitation, California Civil Code $S 2944.6 and29tA.7 and California Business and
Professions Code $ 6106.3, as it is being applied and enforced by the State Bar of California

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("State Bar") to prohibit attorneys from entering into phased or "unbundled" fee agteements when representing clients related to loan modification services. PlaintiffTaylor seeks to enjoin the enforcement of SB 94 in that regard arid prays; for declaratory judgment that these provisions
as

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applied and interpreted by the State Bar violate the United States and California Constitutions.

PARTIES

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2)

PlaintiffTaylor is a resident of the county of Los Angeles and

an attorney licensed by the

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State Bar of Califomia to practice law, is benehcially interested in this matter and has suffered

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injury within one year of the filing of this action by virtue of the unconstitutional interpretation
and enforcement of SB 94 by the State

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Bar. I{e also brings this suit for declaratory relief on behalf

of all other persons damaged by the actions of the State Bar by its illegal application of SB 94, including on behalf of other members of the Sitate Bar and citizens of California seeking legal

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t7 representation in dealing with financial institutions with respect to loan modifications during this
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3)

Defendant State Bar is a public corporation within the judicial branch of government,

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serving as an arm of the California Supleme Court. It maintains offices in Los Angeles County at I149 South Hill Street, Los Angeles,

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4)

Defendant Jayne Kim is the lnterim Chief Trial Counsel of the State Bar and is a resident

of Los Angeles Counry, Defendant Kim is re,sponsible for the enforcement of some of the
provisions of SB 94 challenged by Plaintiffherein. She is sued both in her ofhcial and personal capacity.

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COMPLAINT

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5)

The true names of defendants named herein as

I through 100 inclusive are sued both in

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their official and personal capacities and are presently unknown to Plaintiff, who therefore sues
such defendants by fictitious names,

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Plaintiffwill

amend this Complaint to show the true namos

and identities of these defendants when they have been ascertained. Does l-100 are responsible

for the interpretation and/or the enforcement c,f some of the provisions of SB 94 challenged by

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Plaintiff herein.

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6)

Plaintiff is informed and believes, and thereon alleges, that each defendant herein was the

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agont or employee of each of the other co-defendants and, in doing the things hereinafter alleged, was acting within the course and scope of such agency or employment and with the permission and consent of their co-defendants.

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COMMON FACTUAI AND LEGAL ALLEGATIONS

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This controversy began with the enactrnent of SB 94 on October I l, 2009. SB 94 was
$$ 2944.6 and,2944.7 and

r4 codified in, among other sections of Californiarcodes, Civil Code
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Califomia Business and Professions Code 0 6106.3.

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8)

The State Bar publicly takes the position that an attomey who provides a bonower loan

modification or other forbearance services may not agree with the bonower that the services
requested

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will

be broken down into component parts and that a fee for each component part may

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not be earned and collected as each component part is completed,

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9)

The State Bar also publicly takes the position that if the services to be provided are in fact

loan modification services or other forbearanc,l services, or are an integral part of such services, but the services are not expressly designated as "loan modification" services in the fee agreoment,

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SB 94 would apply even if the services are labeled as something other than loan modification
services.

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COMPIAINT

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10)

The State Bar has publicized to its mernbers that the positions stated in the prior two

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paragraphs must govern the conduct of its mernbers and those positions

will

be relied upon in

disciplinary proceedings.

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Plaintiff'has entered into engagement argreements with clients that speciff that he will

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perform services described, among other thing;s, as: (a) Perform Financial Analysis of Client's Case; (b) Formulate Theory of Client's Case for Loan Modification; (c) Prepare Loan

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Modification Package on Behalf of Client (Budget, Profit & Loss, Etc.); (d) Prepare a Demand
Letter Directed to Lender. This rype of agreernent is sometimes referred to as phased or

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"unbundled" fee agreements in representing clients related to loan modification services. Plaintiff
and clients have entered into engagement agreements containing the above terms.

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Plaintiff has on some occasions in the past and prior to the enactment of SB 94 charged

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and collected fees for each service listed in the paragraph above after his firm

fully performed the

specific service his firm contracted to perform and represented that it would perform.

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l3)

Plaintiff is informed and believes and on that basis alleges that many other members of the

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State Bar have structured engagement letters and have collected fees in the same manner as

Plaintiff alleses above,

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l4)

A violation of Civil Code $ 2944.7 sutrjects a person to substantial fines and penalties,

including criminal penalties. The statute states, in pertinent part:
(a) Nonvithstanding any other provision of law, it shall be unlawful for any person who negotiates, attenrpts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower, to do any of the following: (l) Claim, demand, charge, collect, or receive any compensation until after the person has fully performed each an:d every service the person contracted to perform or represented ttrat he or she would perform. (2) Take any wage assignmen! any lien of any type on real or personal

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property, or other security to secLlre the payment of compensation.

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COMPLAINT

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(3) Take any power of attorney from ttre borrower for any purpose. (b) A violation of this section by a natual person is a public offense punishable thousand dollars ($10,000), by ;rm not to exceed one year, or by both that by a business entity, the violation is punishable by a fine not exceeding fifty thousand dollars ($50,000). These penalties are cumulative to any other r,emedies or penalties provided by law,

by imprisonment

fine

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A violation of the section by

a natural person lis a

public offense punishable by a fine not

exceeding ten thousand dollars ($ 10,000), by iimprisonment in the county exceed one year, or by both that fine and imprisonment,

jail for a term not to

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Defendants have initiated proceedings in the State Bar Court against Plaintifffor, among

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other things, the practice of phased engagement agreements and subsequent collection of f'ees pursuant to phased engagement agreements.

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l6)

The State Bar has provided Plaintiff and many other citizens contradictory and vague

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directives and instructions about the interpretation and enforcement of SB 94. Shortly after SB 94
was enacted, the State Bar and its agents mader statements that were communicated to Plaintiffand others that phased or unbundled engagement agreements did not violate SB 94's provisions.

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Plaintiff has been forced to alter his m<lde of entering into engagements with clients

so that

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in spite of the fact that in some given situations his duty to represent the best interests of a client would reasonably call for performing fewer than all of the phases of loan modification services
and charging only for those services of value he had completed, he and his firm must, in spite

of

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contrary indications, perform all of the phased services in order to get paid. Thus, Plaintiffis foreclosed from aiding clients who need help in understanding and dealing with large financial

institutions and their agents in a manner tailored to each client's situation and as agreed to by the

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client. Plaintiff is informed and believes and on that basis alleges that many other members of the
State Bar are now forced to conduct themselves in a similar fashion.

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COMPLAINT

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The illegal application of SB 94 has caused monetary and other damages to Plaintiff by

limiting the manner in which he may enter freely into agreements with clients to aid them as he
has done for many clients in the past and for which he has been

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justly compensated,

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19)

The plain language of SB 94 does not prohibit phased or unbundled engagement

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agreements nor does the legislative history of the

bill lend support to such a prohibition.

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The State Bar takes the position in the application of SB 94 to its members that it does not

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apply to contracts or fee agreements entered imto prior to October I l, 2009, but qualifies that

position in its public pronouncements by stating only that "advanced fees paid to an attorney prior to October I l, 2009 are not affected by SB 94," This statement thus leaves open the possibility of
State Bar as to contracts formed by its members before October l

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2009 that result in services rendered and payments made after October 11, 2009.

FIRST CAUSE OF ACTION
(For Violations Against

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AJl5ffidants of Anicle I, Sectionl0 of the United Constitution and Article l, Seotion 9 of ttre California Constitution)
2,0 above as

States

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Plaintiff incorporates paragraphs I to

though set forth in fullherein.

The challenged provisions of SB 94,

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applied by the State Bar, unconstitutionally

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infringe upon the rights of Plaintiff, other members of the State Bar and citizens of Califomia
seeking legal representation under Article

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I, Srlction l0 of the United

States Constitution, which

states that no State shall pass any law "impairing the Obligation

of Contracts."

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23)

The challenged provisions of SB 94 ai applied by the State Bar unconstitutionally infringe

upon the rights of

Plaintiff, other members of'the State Bar and citizens of California seeking

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legal representation under Article

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Section 9 of the California Constitution, which states that a

"law impairing the obligation of contracts ma)/ not be passed."

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COMPLAINT

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24)

By acting and threatening to act under the color of law to deprive plaintiff and other State

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Bar members of rights guaranteed by the united States and california Constitution, defendants
have caused and threaten grave and ineparable damage to

plaintiffand others.

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25)

As a direct and legal result of the acts imd omissions of these defendants, and each of them.

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Plaintiff has suffered damages in an amount to be proven at trial.

(For
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ViolatioE
the California Constitution)

Due Process Clause

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section 7 of

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Plaintiff incorporates paragraphs

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to 25 above as though set forth in full herein.

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27)

By acting and threatening to act in the rnanner alleged above, defendants have violated the

Due Process Clause of the Fourteenth Amendment of the United States Constitution.

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28)

By acting and threatening to act in the rnanner alleged above, defendants have violated the

I7 Due Process clauses of Article I, section 7 of the california constitution.
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29)

The challenged application of sB 94 by the State Bar violates the Due Process Clauses

of

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the Fourteenth Amendment of the united Staters constitution and Article

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Section 7 of the

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California Constitution in at least the followins wavsl

a)

By causing agents of the State Bar and prosecutors of the State Bar,s Office of
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Chief Trial Counsel ("OCTC") to apply SB 94 to members of the State Bar

they choose

rather than as the language of SB 94 states, and subjecting Plaintiff and others to penalties and potential penalties under provisions of SB 94 that were not intended to apply to them under circumstances as they are being applied, thus depriving Plaintiff of property and

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potentially of liberry without due process of law.
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COMPI-A]NT

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b)

By subjecting Plaintiffto potential sanctions and penalties, including criminal

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penalties, for failing to comply with provisions of SB 94 as applied which lack standards that give Plaintiffand others adequate notice of their obligations, thus depriving plaintiff

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of property and potentially of liberry vrithout due process of law.

30)

As a direct and legal result of the acts and omissions of these defendants, and each of them,

Plaintiffhas suffered damages in an amount to be proven at trial.
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(For Declaratory
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31) 32)

Plaintiff incorporates paragraphs I to il0 above

as though set

forth in full herein.

An actual and immediate controversy exists between Plaintiffand defendants. Plaintiff

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contends thatthe challenged provisions

ofSB 94 and defendants' actual and threatened

enforcement efforts violate and threaten to violate the constitutional rights of

Plaintifl

as set forth

above. Defendants maintain that allof defendlants'enforcement efforts and planned enforcement
are constitutional and lawful.

I7 efforts
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33)

Plaintiffis entitled to a judicial declaration of his rights in this controversy. Without

such

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a declaration,

Plaintiff will be uncertain about his rights and responsibilities under the challenged

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provisions and may face substantialpenalties and fines if he does not comply with the provisions
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wrongfully interpreted by the State Bar. Without such a declaration, Plaintiff will be required

to forego rights guaranteed under the United Sitates and California Constitutions to avoid risking
such penalties.

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dants)

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34)

Plaintiff incorporates paragraphs I to :]3 above
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as though set

forth in full herein.
COMPi-A]NT

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35)

Plaintiffis entitled to preliminary and permanent injunctive relief. Defendants

are acting

and threaten to act under color

of law to deprive Plaintiffof his constitutional rights, plaintiffis

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suffering and will continue to suffer irreparable injury as a result of the enforcement and
threatened enforcement of the challenged provisions of SB 94 by the State Bar as set forth above.

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Plaintiffis faced with the choice of cornplying with

an unconstitutional scheme

of

enforcement by the State Bar or risking substamtial penalties if he does not comply with the
challenged provisions

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ofSB

94.

37)

Plaintiffhas no plain, adequate or speedy remedy at law.

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(ForViolationsof42u.imandDefendantSDoesl-l00
in their official capacities)

ETFTH CAIUSE OF ACTION

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38) 39)

Plaintiff incorporates paragraphs I to 37 above

as though set

forth in full herein.

The actions of Defendant Kim and Does 1-100 described above deprived the

Plaintiffof

procedural and substantive Due Process rights conferred upon him by the Due Process Clause

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the Fourteenth Amendment to the United States Constitution. 20

of

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40)

The actions of the State Bar, as describ,ed above, were arbitrary and capricious and

therefore violated the substantive Due Process rights of Plaintiff. In addition, Plaintiffs
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procedural Due Process rights were violated because there was no "procoss" by which Plaintiff could challenge the unconstitutional interpretation and enforcement of SB 94 in the State Bar

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Court. He has been forced to bring this action to protect his Due Process Rights. The deprivations
26 of the procedural and substantive Due Process rights of Plaintiffwere a proximate result of the 27 policies, procedures, practices, and/or customs;maintained by Defendants, and each of them. 28

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COMPLAINT

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Defendants Kim and Does 1-100, and each of them, acted with deliberate indifference to

the rights of

Plaintiff. As a direct and legal result of the acts and omissions of these defendants,

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and each of them, Plaintiffhas suffered damages in an amount to be proven at

tial.

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42)

The aforementioned acts of defendants;Kim and Does l-100, and each of them, were

willful, wanton, malicious and oppressive thereby justiffing the awarding of exemplary and
punitive damages against those defendants,

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(For Violations

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SIX'IH CAUSE OF ACTION
Alt Defendants)
as though set

Plaintiff incorporates paragraphs I to 4.2 above

forth in full herein.

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44)

The aforementioned acts of defendants, and each of them, interfered with the exercise

and/or enjoyment of rights sesured by the Constitution and laws of the United States and the Constitution and laws of Californi4 including, but not limited to, procedural and substantive Due
Process rights. Said interference was accomplished by the inaccurate and illegal interpretation and

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enforcement of SB 94,

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45)

As a direct and legal result of the acts end omissions of these defendants, and each of them.
suffered damages in an amount to proven at trial.

2l Plaintiffhas
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46)

Plaintiffwill sufler immediate

and inelparable injury for which there is no adequate

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remedy at law if the aforementioned acts of defendants are allowed to continue.

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47)

Plaintifftherefore seeks injunctive reliof. both preliminary and perrnanent, to stop

defendants' unlawful acts described above.

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COMPLAINT

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48)

Plaintiff also seeks to recover the costs of this suit and, pusuant to Califomia Civil Code $

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52.1(h), their reasonable attorney fees.

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49)

This Court has the power under Code of Civil Procedure $1021.5, the',private Attomey

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General Doctrine," to award attorneys' fees to Plaintiffwhere (a) a significant benel4 whether pecuniary or nonpecuniary, has been conferrecl on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement are such as to make the award appropriate, and (c) payment of such fees is more appropriately made by defendants rather than from the recovery of funds at issue in this action.

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50)

This Court has the power under Govemment Code $800 to award attomeys' fees to

Plaintiffwhere the actions of a public entily or official are found to be wholly arbitnry or
capricious.

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51)

This Court also has the power to award attomey fees and costs pursuantto 42 U.S.C.

S 1988 to a

plaintiff prevailing upon a 42 U.S.C. $ 1983 cause.

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52)

This Court also has the power to award attorney fees and costs pursuant to Cal. Civ. Code

52.1(h).

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as

follows:
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A declaratory judgment holding that the challenged provisions of SB 94 as interpreted and

enforced by the defendants violate the United States and California Constitutions;

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A preliminary and permanent injunction prohibiting the defendants from enforcing the

challenged provisions of SB 94 against members of the State Bar;

General and compenstory damages, according to proof;
.,11COMPLAINT

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4)

An award of attorneys' fees pursuantts 42 U.S.C. 1988, California Civil Codeg 52.1O), $

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Cal' Code Civ. Proc. $ 800 and California Code of Civil Procedure$ 1021.5 against all defendants.

J jointly and severally; 4
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For costs of suit; and
For such other relief as the Court may deem just and proper.

Dated: January 12,2012

BOSTWICK & JASSY

np

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By

ar) barul. tbcfil,ij- / <w (/

GARY L. BOSTWICK Attorneys for SWAZI ELKANZI TAYLOR

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COMPI-AINT

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