Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 1 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Quarles & Brady LLP

Firm State Bar No. 00443100 Renaissance One, Two North Central Ave. Phoenix, AZ 85004-2391
TELEPHONE 602.229.5200

John S. Craiger (#021731) John.Craiger@quarles.com David E. Funkhouser III (#022449) David.Funkhouser@quarles.com Attorneys for Defendant Lisa Jean Borodkin IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA XCENTRIC VENTURES, LLC, an Arizona limited liability company, Plaintiff, v. LISA JEAN BORODKIN and JOHN DOE BORODKIN, husband and wife; RAMOND MOBREZ and ILIANA LLANERAS, husband and wife; DANIEL BLACKERTS and JANE DOE BLACKERTS, husband and wife; ASIA ECONOMIC INSTITUTE, LLC, a California limited liability company, DOES 1-10, inclusive, Defendants. No. 2:11-CV-01426-PHX-GMS DEFENDANT LISA JEAN BORODKIN'S JOINDER IN MOTIONS OF RAYMOND MOBREZ, ILIANA LLANERAS, AND ASIA ECONOMIC INSTITUTE, LLC TO DISMISS FOR LACK OF PERSONAL JURISDICTION, AND TO DISMISS FOR IMPROPER VENUE; OR IN THE ALTERNATIVE TRANSFER FOR IMPROPER VENUE (28 U.S.C. 1406(A)), OR IN THE ALTERNATIVE TO TRANSFER FOR CONVENIENCE (28 U.S.C. 1404(a) (Oral Argument Requested) (Assigned to the Honorable G. Murray Snow)

Defendant LISA JEAN BORODKIN hereby joins in the Motions of Defendants Raymond Mobrez, Iliana Llaneras, and Asia Economic Institute, L.L.C. (the AEI Parties) (1) to Dismiss for Lack of Personal Jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2); and (2) to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3) on the ground that the venue is improper; or in the alternative, to transfer this

QB\145800.00002\14943635.1

-1-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 2 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

action to the Central District of California pursuant to 28 U.S.C. 1406(a), or in the alternative to transfer for convenience pursuant to 28 U.S.C. 1404(a), and incorporates such Motion and supporting papers by reference. In addition, this Joinder in Motions is supported by the Memorandum of Points and Authorities below, and the papers, records and pleadings on file herein, and specifically without waiving other defenses under Federal Rule of Civil Procedure 12, motions for which are filed concurrently with this Notice of Joinder. MEMORANDUM OF POINTS AND AUTHORITIES I. THE ACTION SHOULD BE DISMISSED FOR LACK OF PERSONAL JURISDICTION. A. Introduction

Defendant Lisa Jean Borodkin (Ms. Borodkin) hereby joins in the motions of the AEI Parties to dismiss this action for lack of personal jurisdiction. All parties are in agreement that a federal court sitting in Arizona in a diversity proceeding applies Arizona's long-arm statute to determine whether it has personal jurisdiction over a defendant. See Ariz. R. Civ. P. 4(e)(2). Arizona's long-arm statute grants Arizona courts jurisdiction coextensive with the limits of federal Due Process. See Williams v. Lakeview Co., 199 Ariz. 1, 3 (Ariz. 2000). The burden of proving jurisdiction falls on the plaintiff. See Butchers Union Local No. 498, United Food and Commercial Workers v. SDC Inv., Inc., 788 F.2d 535, 538 (9th Cir. 1986). The issue of personal jurisdiction cannot be decided by applying any mechanical test or "talismanic jurisdictional formulas. See Williams v. Lakeview Co., 199 Ariz. 1, 3-4 (Ariz. 2000) [T]he facts of each case must [always] be weighed in determining whether personal jurisdiction would comport with "fair play and substantial justice." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 485-486 (1985).

QB\145800.00002\14943635.1

-2-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 3 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Plaintiff Xcentric Ventures L.L.C. (Xcentric) concedes that it lacks general personal jurisdiction over the defendants. See Doc. 261 at 4:2-4. The only question on this motion is thus whether Xcentric has specific personal jurisdiction over Ms. Borodkin. B. Ninth Circuit Standard for Specific Jurisdiction

In the Ninth Circuit, specific jurisdiction may be exercised over a nonresident defendant only if the following three-part test is met: (1) the defendant purposefully directs his activities to the forum or a resident thereof; or performs some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim arises out of or relates to the defendants forum-related activities; and (3) the exercise of jurisdiction is reasonable. See Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2010). This test is sometimes called the Schwarzenegger test, after Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (This motion will use Schwarzenegger test to avoid confusion.) Xcentric does not dispute this standard. See Doc. 26 at 4:19-16. The burden to demonstrate the first two elements rests squarely on Plaintiffs shoulders. See Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008). C. Xcentric Fails to Meet Its Burden under the Schwarzenegger Test of Showing that Ms. Borodkin Purposefully Directed Tortious Activities at the Forum.

The first prong under the Schwarzenegger test for specific jurisdiction is satisfied by either purposeful availment or purposeful direction, which . . . are, in fact, two distinct concepts." See Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. Cal. 2010). "A purposeful availment analysis is most often used in suits sounding in contract. A purposeful direction analysis, on the other hand, is most often used in suits
1

References to Doc __ are to documents filed in this action.

QB\145800.00002\14943635.1

-3-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 4 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

sounding in tort." Id. Because this is a malicious prosecution action, a purposeful direction analysis is the proper one. The only allegation in the Complaint that Xcentric claims satisfies the purposeful direction prong of the Ninth Circuit test for specific jurisdiction is Paragraph 9 of the Complaint. See Doc. 26 at 7:6-10. Paragraph 9 alleges, in a wholly conclusory fashion: 9. 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 the personal jurisdiction within the State of Arizona. See Compl., 9.2 This conclusory allegation does not satisfy Xcentrics burden of showing specific personal jurisdiction. [T]he plaintiff cannot simply rest on the bare allegations of its complaint if controverted by evidence incorporated into defendants motion. See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004); see also Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280 (9th Cir. 1977). 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. Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784, 787 (9th Cir. 1977). Xcentric attempts to sidestep this problem by advancing an argument that purposeful direction is met by: (1) the assertion that Xcentric incurred legal fees in the State of Arizona sufficient to meet the jurisdictional amount, see Doc. 26 at 5:6-21; and (2) reliance on dicta in Magedson v. Whitney Information Network, Inc., 2009 WL 113477 (D. Ariz. 2009). (Doc. 26 at 6:11-7:10). Xcentric misstates Whitney, which is also
2

References to Compl. are to the Complaint in this action.

QB\145800.00002\14943635.1

-4-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 5 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

distinguishable on its facts, and the rule argued for by Xcentric is contrary to the Ninth Circuits reasoning in cases such as Bancroft & Masters v. Augusta Nat'l, 223 F.3d 1082 (9th Cir. 2000), Brayton, 606 F.3d 1124, this Courts reasoning in Xcentric Ventures, LLC v. Bird, 683 F. Supp. 2d 1068, 1074 (D. Ariz. 2010) (Silver, C.J.) and the Arizona Supreme Courts reasoning in Bils v. Bils, 200 Ariz. 45 (Ariz. 2001). 1. Xcentric Fails to Show that Ms. Borodkin Expressly Aimed Her Conduct at Arizona.

Xcentric cites Whitney to state that "'the purposeful direction or availment' standard is satisfied where the Complaint alleges that the Defendants engaged in wrongful conduct entirely outside of Arizona . . . which was targeted at Xcentric whom the Whitney defendants knew was based in Arizona." See Doc. 26 at 6:11-15. Xcentrics argument confuses the Schwarzenegger test with the Calder effects test. In order to determine whether a defendants contacts satisfy the first part of the Schwartzenegger test (that is, purposeful direction), the Ninth Circuit uses the three-part "Calder-effects" test, taken from the Supreme Court's decision in Calder v. Jones, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984). Under the Calder effects test, to show purposeful direction, "the defendant allegedly must have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." See Brayton, 606 F.3d at 1128. Contrary to Xcentrics argument, the Whitney court was not discussing the first prong of the Schwarzenegger test for specific jurisdiction (i.e., purposeful direction) in the portion cited at Doc. 26 at 6. Rather, the Whitney court was analyzing express aiming, the second part of the three-part Calder effects test. The Whitney court did not, as Xcentric incorrectly implies, suggest a rule that purposeful direction is satisfied whenever the defendant knows the plaintiff is a resident of the forum state. As the Ninth Circuit wrote in Bancroft, Calder cannot stand for the

QB\145800.00002\14943635.1

-5-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 6 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

broad proposition that a foreign act with foreseeable effects in the forum state always gives rise to specific jurisdiction. Bancroft & Masters v. Augusta Nat'l, 223 F.3d 1082, 1087 (9th Cir. 2000). Rather, after citing that the Ninth Circuit has explained that express aiming (not purposeful direction) occurs when the "defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state, the Whitney court stated, without discussing its reasons, that Plaintiffs sufficiently allege that Defendants engaged in wrongful conduct targeted at Plaintiffs, whom Defendants knew to be residents of Arizona. See Whitney, 2009 U.S. Dist. LEXIS 6400 at *7 (citing Bancroft, 223 F.3d at 1087 and Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)). Nonetheless, the Ninth Circuit has said that there must be something more than foreseeability that the effects would be felt in the forum state. See Bancroft, 223 F.3d at 1087. "Something more" is what the Supreme Court described as "express aiming" at the forum state. See id. Bancrofts discussion of express aiming shows it is an intensely fact-specific analysis, depending on the claims and the parties. What is express aiming at an individual may not be express aiming at a corporation that does business world-wide. See Gordy v. Daily News, L.P., 95 F.3d 829, 833 (9th Cir. 1996) ("A corporation does not suffer harm in a particular geographic location in the same sense that an individual does.) A more complete analysis of the express aiming prong of the Calder effects test was discussed by this Court in Xcentric Ventures, LLC v. Bird, 683 F. Supp. 2d at 1074, appeal dismissed, 10-15460 (9th Cir. Sept. 7, 2010). In Bird, Xcentric unsuccessfully

QB\145800.00002\14943635.1

-6-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 7 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

attempted to assert personal jurisdiction over Washington-based blogger, Sarah Bird.3 Chief Judge Roslyn Silver declined to find that the express aiming prong of the Calder effects test is met whenever a defendant commits intentional acts with knowledge of the defendants presence in the forum. Chief Judge Silver discussed the underlying facts of Bancroft & Masters, 223 F.3d at 1087, and the 2010 case of Brayton, 606 F.3d at 1129, to conclude that the Ninth Circuit has no mechanistic rule that knowledge of the plaintiffs residence in Arizona is enough to meet express aiming under the Calder effects test. Citing the majoritys opinion in Brayton, Chief Judge Silver wrote: Assuming the dissent is correct that something more than knowledge of the residence of the plaintiff is required for there to be express aiming at the Forum, such a requirement is satisfied here; the parties are competitors in the same business so that the intentional infringement will advance the interests of the defendant to the detriment of the Forum interests of the plaintiff. [Brayton, 575 F.3d] at 988. The majority thus expressly left open the question of whether knowledge of the victim's residence combined with an intentional tort is sufficient to satisfy the express aiming/intentional targeting requirement, or if "something more" is required. Xcentric Ventures, LLC v. Bird, 683 F. Supp. 2d at 1074 (emphasis added) (dismissing action for lack of personal jurisdiction). This result has been followed in this District in other intentional tort cases where this Court has declined to find the express aiming and knowledge that harm is likely to be suffered in the forum state prongs of the Calder effects test satisfied by merely an intentional act and knowledge of the plaintiffs Arizona

Incidentally, Xcentric has indicated that it will attempt to draw Ms. Bird into this litigation as a witness, see Doc. 27 at 5, even though Bird has no apparent connection to Xcentrics claims for malicious prosecution. The Complaint mentions the article that Xcentric sued Bird for writing, see Compl. 18-20, seemingly for no reason other than to claim she is a witness.

QB\145800.00002\14943635.1

-7-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 8 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

residence. See, e.g., Mealer v. GMAC Mortg. LLC, 2010 U.S. Dist. LEXIS 121789 (D. Ariz. Nov. 16, 2010). The Arizona Supreme Court also declined to find personal jurisdiction, in a malicious prosecution case with similar jurisdictional facts as this one. In Bils v. Bils, one brother, who resided in Arizona, sued his brother, a California resident, in Arizona for malicious prosecution of a probate matter brought entirely in California. See Bils v. Bils, 200 Ariz. 45, 46 (Ariz. 2001). The Arizona Supreme Court expressly rejected the plaintiffs contention that the defendant -- who plainly knew that the plaintiff (his brother) was an Arizona resident -- was subject to jurisdiction in Arizona under the Calder effects test, simply because the plaintiffs alleged harm was suffered in Arizona. See id. at 47. This was largely due to the plaintiffs active and willing participation in the California probate matter. The court wrote: Calder is a far cry from what we have here. Willy Bils was an active, willing participant in a will contest in California. . . . All of the defendants' underlying conduct, i.e., creation of the pleadings, occurred in California and Oregon. 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. . . . We reject the argument . . . that an intentional tort that causes harm to an Arizona resident will always be sufficient to confer in personam jurisdiction on the Arizona courts. Under the Constitution of the United States, that is where the analysis begins, but is not where it ends. Id. at 47-48 (Ariz. 2001) (Martone, J.)(emphasis added). In Bils v. Bils, the Arizona Supreme Court held that Arizona did not have jurisdiction over the defendant or his lawyer. Id. at 48. Yahoo! Inc. v. La Ligue Contre Le Racisme, 433 F.3d 1199, 1207 (9th Cir. 2006), does not support the exercise of personal jurisdiction in this case, as Xcentric argues. Doc. 26 at 5:10-13. Yahoo! did not establish that personal jurisdiction could be found wherever the defendant claimed to have suffered the jurisdictional amount of injury. It was

QB\145800.00002\14943635.1

-8-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 9 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

clarifying that the brunt of the harm need not have been suffered in the forum state, but that did not supplant the other requirements of the Calder effects test. See 433 F.3d at 1207. Xcentrics claim that nothing more is necessary to satisfy the first prong of the specific jurisdiction test, see Doc. 26 at 5:26-28, is simply wrong. The Yahoo! court flatly declined to find that sending a cease and desist letter was sufficient to confer personal jurisdiction (we do not believe that LICRA's letter is a contact that would, if considered alone, justify the exercise of personal jurisdiction), see id. at 1209, and similarly declined to find that serving process would confer personal jurisdiction (We do not regard the service of documents . . . as contacts that by themselves justify the exercise of personal jurisdiction), see id. Finally, it was not the commencing litigation in France in an effort to change Yahoo!s business practices that the Ninth Circuit found to confer jurisdiction, but the fact that the French defendant had obtained two court orders from a French court directing Yahoo! to take actions in California, on threat of a substantial penalty. See id. 2. Xcentric Fails to Show that Ms. Borodkin Knew the Harm Would Be Suffered Primarily in Arizona.

Xcentric relies almost exclusively on Whitney in opposing the AEI Parties objections to personal jurisdiction. However, Whitney is distinguishable on its facts. When applying the third prong of the Calder effects test to the case before it, the Whitney court found it sufficient that: Plaintiffs allege that Defendants knew the harm they caused would be felt primarily in Arizona, in part because Plaintiffs filed motions to dismiss for lack of personal jurisdiction in the Florida Action. See Whitney, 2009 U.S. Dist. LEXIS 6400, at *6-7 (emphasis added). The Whitney court stated no other grounds for finding that defendants knew that harm was likely to be suffered in the forum state. Xcentrics active, willing participation in the California Action is what makes this case more like Bils v. Bils and distinguishable from Whitney. Xcentric, a frequent litigant,

QB\145800.00002\14943635.1

-9-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 10 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

is demonstrably capable of contesting jurisdiction and seeking transfer of cases to Arizona, when it deems it advantageous. See, e.g., Hy Cite Corp. v.

Badbusinessbureau.com, L.L.C., 297 F. Supp. 2d 1154, 1167 (W.D. Wis. 2004) (Xcentrics predecessor); Whitney. In the California Action, unlike Whitney and Hy Cite, Xcentric did not challenge personal jurisdiction. Instead, Xcentric purposefully invoked the benefits and protections of California law. Xcentric made two unsuccessful motions under Californias AntiSLAPP law, Code of Civil Procedure Section 425.16. Xcentric sought attorneys fees under the California Anti-SLAPP statute on March 22, 2010.4 On September 27, 2010, Xcentric filed a second unsuccessful motion under the California Anti-SLAPP statute, also seeking the same attorneys fees it seeks here.5 Therefore, Xcentric cannot fairly equate this case to Whitney. Defendants did not anticipate that harm incurred by Xcentric would be primarily felt in Arizona. Xcentric was trying to recover its alleged losses in the California Action itself. C.f. Whitney, 2009 U.S. Dist. LEXIS 6400, at *6-7. Finally, Xcentrics citation to Bils v. Nixon, Hargrave, Devans & Doyle,. 179 Ariz. 523, 880 P.2d 743 (App. 1994), ironically supports dismissal or transfer of this action. The Arizona Supreme Court contrasted Bils v. Nixon with Bils. v. Bils, because the plaintiffs right to privacy was invaded in Arizona in Nixon: We need not decide the propriety of the opinion in [Bils v. Nixon, Hargrave, Devans & Doyle,. 179 Ariz. 523, 880 P.2d 743 (App. 1994)]. . . [T]he defendant there at least called an Arizona resident from out of state seeking information that could be used unlawfully against the plaintiff. There, arguably, the defendant invaded the plaintiff's right to privacy in Arizona.
4

See AEI v. Xcentric, 10-cv-1360 (C.D.Cal. Mar. 22, 2010) Doc.9 (available at https://ecf.cacd.uscourts.gov/doc1/03119842894 ). 5 Id. (C.D. Cal. Sept. 27, 2010) Doc 154 (available at https://ecf.cacd.uscourts.gov/doc1/031110952801 ).

QB\145800.00002\14943635.1

-10-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 11 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Bils v. Bils, 200 Ariz. at 47-48. For the exact same reason, even if Xcentric were able to meet its burden of showing purposeful direction under the three-pronged Calder effects test (which it cannot), the exercise of personal jurisdiction in Arizona over these California defendants would not be reasonable. As discussed below, an important California state policy in protection of its citizens right to privacy has been invaded. D. Xcentric Fails to Meet Its Burden of Showing that the Claim Arises Out of or Relates to Ms. Borodkins Forum-Related Activities.

The second part of the Schwartzenegger test for specific jurisdiction requires that the claim arises out of or relates to the defendants forum-related activities. See Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124. Again, Xcentric relies on Whitneys dicta, unsupported by reasoning, to support the second part of the Schwartzenegger test for specific jurisdiction. See Doc. 26 at 7-8. In Whitney, the court applied a but for causal relationship to find a nexus between the underlying Florida lawsuit and Xcentrics claims in Arizona, without discussion. See Whitney, 2009 U.S. Dist. LEXIS 6400 at *8 (But for the Florida Action, Plaintiffs would not have brought this lawsuit.). Respectfully, such a literal but for analysis would render the second part of the Schwartzenegger test meaningless. If that were the standard, than in any case where the defendant challenged specific jurisdiction, the plaintiff could meet its burden on the second prong of the Schwartzenegger test by stating that but for the alleged tort, the plaintiff would not have sued the defendant in that forum. It is instructive to distinguish the conduct in Bancroft & Masters from that here. Bancroft was a declaratory judgment action to determine which party had the right to use a certain domain name. See 223 F.3d at 1085. In Bancroft, the express aiming prong of the Calder effects test was met because the defendant and plaintiff were competitors. The defendant acted with the intention to wrongfully interfere with the plaintiffs business in California when it sent a letter to a domain name registrar, intending to trigger a dispute

QB\145800.00002\14943635.1

-11-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 12 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

resolution. See 223 F.3d at 1088. Because it was the letter to the domain registrar that forced the plaintiff to choose between bringing the declaratory judgment suit and losing the use of its website, the nexus between the defendants act of express aiming and the events giving rise to the lawsuit was established. See Bancroft 223 F.3d at 1088. The required nexus is lacking between any express aiming and the facts giving rise to this Action. As discussed in greater detail in Ms. Borodkins motion for more definite statement, Xcentric alleges nothing more specifically against Ms. Borodkin but litigation tasks taken in the California Action. All of Xcentrics alleged damages are fees and costs it voluntarily incurred in California, litigating the California Action. See Doc. 26 at 5:16. Therefore, Xcentric has failed to meet its burden on the second prong of the Ninth Circuit test for specific jurisdiction. E. Exercise of Personal Jurisdiction Would Be Unreasonable Because of the Substantial Conflict With California State Substantive Law.

Even if Xcentric carried its burdens under the first and second prongs of the Schwartzenegger test, it would fail to show that personal jurisdiction in Arizona comports with Due Process. The factors have been discussed extensively in the AEI Parties motions, which are incorporated herein. However, it is necessary to correct the record on the point regarding Extent of Conflict with California Sovereignty. As discussed in the AEI Parties motions, many allegations in the Complaint rely on the contents of recordings of telephone conversations that were made without the consent of Defendant Raymond Mobrez, a California resident. See Compl. 41-43. In opposing the Motion to Dismiss for Lack of Personal Jurisdiction, Xcentric argued in discussing the factor, Extent of Conflict with California Sovereignty: [R]egardless of the fact that Arizona is a one-party state and that the recordings were clearly lawful under Arizona law, even if this court were to somehow apply California law, the recordings would be entirely admissible (assuming sufficient authentication).

QB\145800.00002\14943635.1

-12-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 13 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Doc. 27 at 7 (emphasis added). In opposing the Motion to Dismiss or Transfer Venue, Xcentric argued: Far from agreeing with Plaintiffs arguments that the recordings were illegal, the California district court specifically rejected that argument and determined that the recordings were not illegal; [T]he recordings at issue do not violate federal law. In sum, because the recordings at issue comply with federal law, they may be admitted as evidence without regard to California Penal Code 632. Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054, *1112 (C.D. Cal. 2011). Because the recordings were not unlawful, they would be admissible in any action whether in Arizona or California[.] Doc. 27 at 9 (emphasis added). These assertions are flatly contradicted by the reported opinion that Xcentric cites. In the California Action, Xcentric attempted unsuccessfully to offer the recordings in support of Xcentrics first6 motion for summary judgment. See Asia Econ. Inst. v. Xcentric Ventures, LLC, 2010 U.S. Dist. LEXIS 133370 at *29 (C.D. Cal. July 19, 2010). Contrary to Xcentrics misrepresentation, the Court expressly found some of the recordings that Defendants seek to admit were obtained in violation of California Penal Code 632(a). See id. at *33 (emphasis added). California Penal Code 632(d) prohibits the use of recordings obtained in violation of that section from any proceeding other than one to enforce that section. See id. at *33 (citing Penal Code 632(d)). The Court in the California Action expressly found that the Ninth Circuit requires that this rule of evidence must be applied in diversity cases: The Ninth Circuit has concluded that California Penal Code 632 embodies a state substantive interest in the privacy of California citizens from exposure of their confidential communications by third parties, and therefore is "properly characterized as substantive law within the meaning of Erie" and must be applied Xcentric had moved for summary judgment on all claims. The Court found the motion "inappropriate given the Court's prior Order bifurcating the RICO/extortion claims." id. at *26
6

QB\145800.00002\14943635.1

-13-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 14 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

in diversity cases. Id. at *34-35 fn.12 (citing Feldman v. Allstate Ins. Co., 332 F.3d 660, 667 (9th Cir. 2003)). The Court specifically stated that California Penal Code 632(d) would not apply to the motion before it only because it was directed to a claim brought under federal substantive law. The Court expressly stated, The result would be different if this case were proceeding on the ground of diversity jurisdiction. See id. at *34-35 fn. 12. In other words, California state law would bar the recordings in a diversity action. Moreover, the Court expressly found that if the Court were to engage in a choice-of-law analysis between Arizona and California law, the Court undoubtedly would apply California law, given California's strong public interest in protecting the confidentiality of certain communications. See id. at *33 (citing Downing v. Abercrombie & Fitch, 265 F.3d 994, 1006 (9th Cir. 2001)). Subject matter jurisdiction for the Complaint in this action is founded exclusively on diversity. Compl. 10. Since the Court in the California Action found that California law would apply, and California Penal Code 632(d) must be applied in diversity cases, the recordings referred to in the Complaints allegations at Paragraphs 41 to 43 would not be admissible in any California case asserting state law claims. That the Court in the California Action expressly found a conflict with Californias state sovereignty and that it undoubtedly would apply California law should end the inquiry. Asserting jurisdiction and venue in Arizona when the very court that presided over the California Action found that California law would exclude the recordings from evidence would offend Due Process. Moreover, a California forum would have greater familiarity with California law that would apply to compulsory counterclaims under California Penal Code 637.2. That section provides, in part, that any person damaged by a violation of Penal Code 632 may

QB\145800.00002\14943635.1

-14-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 15 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

sue civilly to recover the greater of $5,000 or Three times the amount of actual damages, if any, sustained by the plaintiff. See Cal Pen Code 637.2. That the California legislature provided the extraordinary remedy of treble damages under California Penal Code 637.2 demonstrates a strong state policy that must be given deference. Undoubtedly, Xcentric, Ed Magedson, and others with knowledge of the recordings would have to be named in such a compulsory counterclaim. Federal courts in California have construed Penal Code 637.2 broadly, stating that it is not restricted to those who physically made the recordings, but also against any person who aids, agrees with, employs, or conspires with any person or persons to unlawfully do, or permit, or cause such recordings to be made. See Vera v. O'Keefe, 2011 U.S. Dist. LEXIS 54833 at *8 fn. 2, 13 (S.D. Cal. May 23, 2011) (citing California Penal Code 631). Therefore, the motion to dismiss for lack of personal jurisdiction should be granted. II. IN THE ALTERNATIVE, THE COURT SHOULD DISMISS THIS ACTION FOR IMPROPER VENUE OR IN THE ALTERNATIVE TRANSFER IT TO THE CENTRAL DISTRICT OF CALIFORNIA. For the foregoing reasons as well, this Court should dismiss this action as against Ms. Borodkin for improper venue, or transfer it to the Central District of California. It should also be noted that the very first witness from whom Xcentric seeks discovery is the California State Bar. Xcentric claims that it cannot locate Defendant Daniel Blackert and must subpoena the California Bars records. See Doc. 28. Leaving aside the fact that Xcentric has not, and cannot, allege complete diversity for purposes of subject matter jurisdiction if it does not know where one of the defendants is, Xcentrics very first step in this case is to look to California for assistance in locating one of the defendants. Xcentrics claims that it cannot assert personal jurisdiction over Blackert without discovery from a California state entity, underscores the lack of contacts

QB\145800.00002\14943635.1

-15-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 16 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

with Arizona and weighs in favor of dismissal or transfer to California. III. THIS COURT SHOULD SANCTION XCENTRICS COUNSEL UNDER 28 U.S.C. 1927 FOR VEXATIOUSLY MULTIPLYING THE PROCEEDINGS. Section 1927 of 28 U.S.C. provides that "any attorney or other person admitted to conduct cases in any court of the United States . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses and attorneys' fees reasonably incurred because of such conduct." See 28 U.S.C. 1927; Trulis v. Barton, 107 F.3d 685, 691-692 (9th Cir. 1995). Unlike sanctions requests under Rule 11, sanctions requests under 28 U.S.C. 1927 need not be made in a separate motion and need not comply with the 21-day safe harbor provision under Rule 11. Only lawyers can be sanctioned under 28 U.S.C. 1927. Where an attorney in bad faith attempts to relitigate an issue previously decided, the conduct supports a finding that the attorney vexatiously multiplied the proceedings. See Trulis v. Barton, 107 F.3d 685, 692 (9th Cir. 1995); In re Peoro, 793 F.2d 1048, 1051 (9th Cir. 1986) On these particular facts, the conduct of Xcentrics counsel in arguing that the California Action did not find that the recordings alleged at Paragraphs 41 to 43 of the Complaint were made illegally, or that they would be admissible in an action in California under diversity jurisdiction, can only be in subjective bad faith. The Court in the California Action devoted nearly 15 pages of its order in Asia Econ. Inst. v. Xcentric Ventures, LLC, 2010 U.S. Dist. LEXIS 133370 (C.D. Cal. July 19, 2010) to findings regarding admissibility, conflict of laws and California state policy. See id. at *29-44. Xcentrics counsel discussed that Order extensively in its Responses to these motions, See Doc. 26 at 11- 1; Doc. 27 at 7. Xcentric also cited to that Order in the Complaint. See Compl. 57. Moreover, Xcentrics counsel is a member of the California Bar. In light of this, the statement, Because the recordings were not unlawful, they would be admissible

QB\145800.00002\14943635.1

-16-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 17 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

in any action whether in Arizona or California, is not simply wrong, it is in subjective bad faith. There is no doubt that these arguments vexatiously multiplied these proceedings. The parties have been forced to engage in extensive briefing of these complex jurisdictional issues, and correction of the out-of-context legal citations by Xcentrics counsel. The Court has been burdened with analyzing, for a second time, issues that a District Court in California already explained in detail. By filing in Arizona, making specious arguments for jurisdiction, and citing to the order of the previous court out of context, Xcentrics counsel is attempting to circumvent the previous order in California. Accordingly, Xcentrics counsel should be ordered to pay the excess attorneys fees attributable to that conduct. RESPECTFULLY SUBMITTED this 31st day of October, 2011. QUARLES & BRADY LLP Renaissance One, Two North Central Avenue Phoenix, AZ 85004-2391 By /s/ David E. Funkhouser III John S. Craiger David E. Funkhouser III Attorneys for Lisa Jean Borodkin

QB\145800.00002\14943635.1

-17-

Case 2:11-cv-01426-GMS Document 34 Filed 10/31/11 Page 18 of 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

CERTIFICATE OF SERVICE I hereby certify that on October 31, 2011, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrant: David S. Gingras, Esq. (David@GingrasLaw.com) Attorneys for Plaintiff Hartwell Virginia Harris (hartwell@hartwellharris.com) Attorney for Defendants Mobrez, Llaneras and Asia Economic Institute LLC /s/ David E. Funkhouser III

QB\145800.00002\14943635.1

-18-