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Case 2:11-cv-01426-GMS Document 107 Filed 08/13/12 Page 1 of 12

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

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

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA XCENTRIC VENTURES, LLC, an Arizona limited liability company, Plaintiff, v. LISA JEAN BORODKIN et al., Defendants. Plaintiff XCENTRIC VENTURES, LLC (Plaintiff or Xcentric) respectfully submits the following Response to Defendant (Defendant or Ms. Borodkin) Motion to Dismiss for Failure to State a Claim (Doc. #102). I. INTRODUCTION Prior to discussing the merits, it is important to clarify somethingMs. Borodkin appears to fundamentally misunderstand Xcentrics theory of this case. In a nutshell, Ms. Borodkin seems to believe that if she can establish factual merit or legal tenability as to any one of the dozen claims brought against Xcentric in the prior California case, then Xcentrics claims here must automatically fail. In other words, Ms. Borodkin perceives Xcentrics claims as a three-legged stool; if any one leg is removed, the stool cannot stand. This is not only incorrect as a matter of law, it is actually the converse of the correct rule. Rather than three legs, Xcentrics stool is more accurately described as having a dozen legsone for each claim in the prior California action.
RESPONSE TO MOTION TO DISMISS

Case No.: 11-CV-1426-GMS PLAINTIFFS RESPONSE TO DEFENDANT LISA BORODKINS MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

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Case 2:11-cv-01426-GMS Document 107 Filed 08/13/12 Page 2 of 12

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

In order to state a viable claim, it is not necessary for Xcentric to allege that each one of the dozen claims in the prior case was groundless. On the contrary, assuming the other elements of the tort are established, the presence of a single meritless claim is all that is required; the rule is that a malicious prosecution suit may be maintained where only one of several claims in the prior action lacked probable cause ... . Citi-Wide Preferred Couriers, Inc. v. Golden Eagle Ins. Co., 114 Cal.App.4th 906, 914, 8 Cal.Rptr.3d 199 (Cal. 2nd Dist. 2004) (emphasis added) (citing Crowley v. Katleman, 8 Cal.4th 666, 676, 34 Cal.Rptr.2d 386, 881 P.2d 1083 (Cal. 1994)). To be sure, Xcentric agrees that the RICO/extortion claim and the fabricated testimony of Mr. Mobrez and Ms. Llaneras offered in support of that claim are important issues. The fact that Mr. Mobrez and Ms. Llaneras lied about the basis of this claim is prima facie proof of malice; a plaintiff acts with malice when he asserts a claim with knowledge of its falsity, because one who seeks to establish such a claim can only be motivated by an improper purpose. Drummond v. Desmarais, 176 Cal.App.4th 439, 452, 98 Cal.Rptr.3d 183, 193 (Cal. 6th App. Dist. 2009) (emphasis in original) (quoting Albertson v. Raboff, 46 Cal.2d 375, 383, 295 P.2d 405 (Cal. 1956)). However, Xcentrics claims are not solely predicated on the unlawful pursuit of the phony extortion claim. Rather, Xcentric contends that every claim in the case was factually groundless and/or legally untenable for multiple different independent reasons, any one of which would have shown each claim to be devoid of probable cause. For example, it was undisputed in the prior action that Ms. Borodkins client, Asia Economic Institute, LLC (AEI) was in business for nearly nine years, but during that time its revenues were $0 and profits were $0. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054, *2 (C.D.Cal. 2010) (observing that AEI was planning to produce seminars and conferences, and was considering selling memberships to some of those programs ... . However, AEI never actually produced any seminars. During its nine years in operation, AEIs total revenues were $0 and its profits were $0.) (empahsis added). 2
RESPONSE TO MOTION TO DISMISS

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

Despite this, Ms. Borodkin actively pursued numerous claims including two federal RICO claims which required the plaintiff to prove actual economic damages and a California statutory unfair competition claim which required proof that the plaintiff lost money or property as a result of the unfair competition. Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2011 WL 2469822, *8 (C.D.Cal. 2011) (quoting Birdsong v. Apple, Inc., 590 F.3d 955, 959 (9th Cir. 2009)). Clearly, with zero revenue over a period of nine years, Ms. Borodkin knew that AEI could not offer any evidence to show the loss of money or property as a result of any of Xcentrics actions. Indeed, the total failure of proof on the mandatory element of damages resulted in the court granting summary judgment against AEI on its unfair competition claim. This supports only one conclusionthat Ms. Borodkin prosecuted the unfair competition claim knowing that it lacked probable cause because AEI had no actual economic damages. Sangster v. Paetkau, 68 Cal.App.4th 151, 164165, 80 Cal.Rptr.2d 66 (Cal. 1998) (holding [a] litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.) Ms. Borodkins awareness of this flaw is undeniable. Not only did Xcentric immediately confront her with this point, the same issue resulted in a contentious colloquy between Ms. Borodkin and the district judge at a hearing on July 12, 2010 concerning Xcentrics first Motion for Summary Judgment. At this hearingnearly a full year before the case endedthe court asked Ms. Borodkin to explain the factual basis for the damages aspect of the RICO/wire fraud portion of her case which was premised on the allegation that Xcentric made various false statements on its site including a statement that it would not remove reports upon request: [The Court]: The question again is if [Xcentric] had, in your view, said the truth that these defamatory statements will be taken down as opposed to never been taken down, how would that have defrauded your client? [Ms. Borodkin]: Im sorry -3
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048

[The Court]:

For arguments sake, Im acknowledging or accepting for the moment that the statement wasnt true. In other words, Im

agreeing with you, just for arguments sake. How would that lead to a wire fraud against your client? What would your client have done differently? [Ms. Borodkin]: [The Court]: Your Honor, perhaps Id have to ask my client. See, thats the problem, maam. This is, in my view, pretty -- Im looking for a word that is not pejorative that still makes the point -pretty unacceptable lawyering because under Rule 11 youve now admitted to a Rule 11 violation. You filed a wire fraud allegation as a predicate act for your RICO. As you stand at the lectern, you cant even, in a best-world sense, articulate a wire fraud. You now say you have to speak to your client. The rules clearly say that you have to have a good-faith basis for alleging something in a complaint, and how could you have had a good-faith basis without speaking to your client and now being totally unable to articulate a basis? [Ms. Borodkin]: Your Honor, with all do [sic] respect, I was not counsel of record when the complaint was filed. Transcript of July 12, 2010 Hearing at 6:207:20, Exhibit A to Declaration of David S. Gingras submitted herewith (empahsis added). As this dialogue shows, Ms. Borodkin was clearly aware of serious (and ultimately fatal) defects in the claims she was prosecuting. Although she initially attempted to shift blame to her co-counsel by arguing that she was not involved when the Complaint was filed, this point is absolutely irrelevant to the question of her liability for continuing to pursue the case; A person who had no part in the commencement of the action, but who participated in it at a later time, may be held liable for malicious prosecution. Paramount General Hospital Co. v. Jay, 213 Cal.App.3d 360, 366, n.2, 261 Cal.Rptr. 723 4
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048

(Cal. 1989); see also Sycamore Ridge Apartments, LLC v. Naumann, 157 Cal.App.4th 1385, 1406, 69 Cal.Rptr.3d 561, 579 (Cal. 4th Dist. 2007) (holding one may be held liable for malicious prosecution for continuing to prosecute an action after discovering that the action lacks probable cause.) (emphasis added) (citing Zamos v. Stroud, 32 Cal.4th 958, 973, 87 P.3d 802 (Cal. 2004)). This is exactly what Xcentric alleges hereeven assuming Ms. Borodkin had a good faith belief that one or more claims were supported by probable cause when she first appeared in the case, she quickly discovered otherwise but still continued to vigorously pursue all claims. This is sufficient to subject her to liability assuming the other elements of the tort are proven because a lawyer cannot avoid liability for malicious prosecution by claiming to have been ignorant of the merits of the allegations made [by co-counsel]. Cole v. Patricia A. Meyer & Assoc., APC, 206 Cal.App.4th 1095, 1118, 142 Cal.Rptr.3d 646, 664 (Cal. 2nd App. Dist. 2012); see also Zamos, 32 Cal.4th at 969 (explaining [i]t makes little sense to hold attorneys accountable for their knowledge when they file a lawsuit, but not for their knowledge the next day.) In short, even if every argument in Ms. Borodkins Motion to Dismiss was correct, her motion must be denied because her legal premisethat the existence of probable cause as to one claim is a complete bar to a malicious prosecution actionis simply wrong as a matter of law. See Bertero v. National General Corp., 13 Cal.3d 43, 55 n.4, 157 Cal.App.4th 1385, 69 Cal.Rptr.3d 561 (Cal. 1974) (rejecting similar argument and approving jury instruction: a defendant in a malicious prosecution action cannot escape liability for the malicious prosecution of a claim for which he did not have probable cause by joining it with a claim for which he did have probable cause to assert.) Thus, showing that one claim in the prior California action had merit is insufficient to shield Ms. Borodkin from liability for pursuing other claims which she knew were groundless. Returning to the analogy of the 12-legged stool, Ms. Borodkins motion fails because she attacks only one or two legs while ignoring the rest, any one of which would be sufficient to establish her liability. For that reason, her motion should be denied. 5
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048

II.

ARGUMENT In addition to causation/damages which are not at issue here, a claim for malicious

civil prosecution contains three simple elements: 1.) 2.) 3.) A civil action was commenced or continued by defendant; The proceeding lacked probable cause; and The defendant acted with malice.

Zamos, 32 Cal.4th at 969. Ms. Borodkins motion does not dispute the first element of the tort. Instead, she argues the two other elements are missing or cannot be proven for various reasons. Both points are discussed in turn below. b. The Complaint Properly Alleges Lack Of Probable Cause The standards for determining probable cause are clear; An action is deemed to have been pursued without probable cause if it was not legally tenable when viewed in an objective manner as of the time the action was initiated or while it was being prosecuted. The court must determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable. Sycamore Ridge Apartments, 157 Cal.App.4th at 1402, 69 Cal.Rptr.3d at 575 (quoting Sheldon Appel Co. v. Albert & Oliker, 47 Cal.3d 863, 878, 765 P.2d 498, 254 Cal.Rptr. 336 (Cal. 1989)). Of course, if an attorney knows that the facts asserted in a case are not true, then probable cause cannot exist; if defendant knows that the facts he or she is asserting are not true, then defendants knowledge of facts which would justify initiating suit is zero, and probable cause is nonexistent. Sierra Club Found. v. Graham, 72 Cal.App.4th 1135, 115354, 85 Cal.Rptr.2d 726, 737 (Cal. 1st App. Dist. 1999) Insofar as Xcentric can understand her argument, Ms. Borodkin seems to suggest that the underlying California action was legally tenable, and thus not lacking in legal probable cause, because while the case was pending Xcentric was also involved in litigating two other matters Blockowicz v. Williams, 630 F.3d 563 (7th Cir. 2010) and Giordano v. Romeo, 76 So.3d 1100 (Fla. 3d Dist. 2011)brought by third parties seeking remove material from the Ripoff Report website. Ms. Borodkin also cites a third case 6
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048

involving unrelated partiesLevitt v. Yelp!, Inc., 2011 WL 5079526 (N.D.Cal. Oct. 26, 2011)which contained legal theories essentially identical to those she presented in the prior California action in this case (i.e., that an allegation of extortion was sufficient to defeat CDA immunityan argument rejected by the court in Yelp!). Apparently Ms. Borodkins theory is that because the Blockowicz and Giordano cases were pending on appeal at the time the Mobrez/Asia Economic Institute action was filed in California, and because the Yelp! case was pending in a different district court, this created some sort of legal uncertainty regarding the extent to which Xcentric was entitled to immunity under the Communications Decency Act, 47 U.S.C 230(c). Based on this ambiguity, Ms. Borodkin suggests the prior California action against Xcentric was legally tenable. This argument fails for multiple reasons. First, in each of these cases and in rulings both before and after the prior California case against Xcentric was filed, the courts rejected the legal theories advanced by each plaintiff. This does not show that Ms. Borodkins claims against Xcentric were legally tenable; it shows precisely the opposite. Second, both the Blockowicz and Giordano cases involved plaintiffs who did not seek damages from Xcentric. Rather, unlike the case prosecuted by Ms. Borodkin in which AEI demanded millions of dollars in damages1 without any basis for doing so, in both Blockowicz and Giordano the only remedy requested at to Xcentric was injunctive relief, even though such claims are barred by the CDA; claims for ... injunctive relief are no less causes of action than tort claims for damages, and thus fall squarely within the section 230(e)(3) prohibition. Kathleen R. v. City of Livermore, 87 Cal.App.4th 684,

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Even when a claim is factually and legally meritorious, an attorney may still be liable for malicious prosecution for seeking damages which the attorney knows are not supported by probable cause; just as the rule is that a malicious prosecution suit may be maintained where only one of several claims in the prior action lacked probable cause, so too can a malicious prosecution action be maintained where most but not all of the amount sought in the prior action was claimed without probable cause. Citi-Wide Preferred Couriers, 114 Cal.App.4th at 914, 8 Cal.Rptr.3d at 205 (emphasis added) (citing Crowley, supra, 8 Cal.4th at p. 686, 34 Cal.Rptr.2d 386, 881 P.2d 1083)). 7
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048

698, 104 Cal.Rptr.2d 772 (Cal. App. 4th Dist. 2001). See also Noah v. AOL Time Warner, 261 F.Supp.2d 532, 540 (E.D.Va 2003) (recognizing given that the purpose of 230 is to shield service providers from legal responsibility for the statements of third parties, 230 should not be read to permit claims that request only injunctive relief .) Because Ms. Borodkin attempted to obtain substantial money damages, not just injunctive relief, neither Blockowicz or Giorando could have possibly supported her view of the law, even if those cases had ended in favor of the plaintiffs, which neither did. Third, the decision in Blockowicz (which held that Xcentric was not required to comply with a default injunction entered in a case to which it was not a party) was originally decided in favor of Xcentric in the district court on December 21, 2009. See Blockowicz v. Williams, 675 F.Supp.2d 912 (N.D.Ill. 2009). This decision (which was later affirmed in its entirety on appeal) was issued before the prior California action was filed by Mr. Mobrez and Ms. Llaneras on January 27, 2010. The mere fact that Ms. Borodkin hoped the district courts decision in Blockowicz might be reversed on appeal could not support an objectively reasonably conclusion that her clients claims against Xcentric were legally tenable. This is particularly true because as noted by the California district judge, many courts have consistently agreed that Xcentric is immune under the CDA where the allegedly actionable material originated with a third party. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2011 WL 2469822, *5 (C.D.Cal. 2011) (explaining, Whether [Xcentric is] shielded from liability by the CDA is at the heart of this case. The Court notes that this very issue has been litigated by several district courts to date, where nearly identical allegations against Xcentric ... based on Ripoff Report postings have been barred under the CDA. [citations] The Court also finds that the CDA applies to Defendants here.) (citing GW Equity, LLC v. Xcentric Ventures, LLC, 2009 WL 62173 (N.D.Tex. 2009); Intellect Art Multimedia, Inc. v. Milewski, 2009 WL 2915273 (N.Y.Sup. 2009); Whitney Info. Network Inc. v. Xcentric Ventures, LLC, 2008 WL 450095 (M.D.Fla. 2008); Global Royalties, Ltd. v. Xcentric Ventures, LLC, 544 F.Supp.2d 929 (D.Ariz. 2008)). 8
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048

With such an overwhelming body of unanimous case law to inform her that Xcentric was immune under the CDA, her purported reliance on Blockowicz and Giordano (both resolved in favor of Xcentric) could not support an objective conclusion that Ms. Borodkins legal theories were tenable. See Cole, 206 Cal.App.4th at 1106 (noting a determination of probable cause is an objective standard which asks whether any reasonable attorney would have thought the claim tenable.) Finally, although Ms. Borodkin attempts to characterize her position as merely asking this Court to take judicial notice of the decisions in Blockowicz and Giordano, this misstates the true nature of her motion. Rather than asking the Court to take notice of these cases, Ms. Borodkin is also requesting that the Court go far outside the pleadings and make a factual determination as to Ms. Borodkins mental state; i.e., that she subjectively believed (albeit mistakenly2) that the Blockowicz, Giordano and Yelp! cases might have offered legal support for her theory that Xcentric was not entitled to protection under the CDA, despite voluminous evidence to the contrary. Although the existence of probable cause can be resolved by the Court as a matter of law if the underlying facts are undisputed, see Sierra Club, 72 Cal.App.4th at 1154, Ms. Borodkins mental state, extent of research and knowledge raise questions of fact which must be resolved by a jury, not by the Court; When there is a dispute as to the state of the defendants knowledge and the existence of probable cause turns on resolution of that dispute ... the jury must resolve the threshold question of the defendants factual knowledge or belief. Sheldon Appel Co. v. Albert & Oliker, 47 Cal.3d 863, 881, 765 P.2d 498, 508, 254 Cal.Rptr. 336, 346 (Cal. 1989). Of course, a Rule 12(b)(6) motion is not the appropriate vehicle to resolve factual disputes; the sole purpose of the motion is to test the legal sufficiency of the pleadings. Moreno v.

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Beddome, 2012 WL 3150205, *1 (D.Ariz. 2012) (explaining, A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint.) Blockowicz, Giordano and Yelp! were each resolved against the plaintiffs and thus would not have supported Ms. Borodkins claims in the prior California action. 9
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048

For each of these reasons, it would be improper to accept Ms. Borodkins probable cause argument in the context of a Rule 12(b)(6) motion particularly as the existence of probable cause is dependent on matters outside the pleadings. At this stage, the

Complaint pleads sufficient facts to show that Ms. Borodkins claims were not factually or legally tenable. Nothing more is required to establish the second element of the tort. c. The Complaint Alleges Facts Sufficient To Show Malice On pages 1214 of her motion, Ms. Borodkin argues that Xcentric has failed to allege specific facts showing any malice on the part of Ms. Borodkin. This statement is simply wrong and, in any case, it is an argument which both misstates Xcentrics pleading duty and which has already been raised by Ms. Borodkin and rejected by this Court. It should be rejected again. As the Court will recall, over the past year since this action began, Ms. Borodkin has filed numerous successive motions challenging jurisdiction, venue, and the factual specificity of Xcentrics complaint (twice). In her recent Second Motion to Strike (Doc. #64), Ms. Borodkin requested dismissal of this matter or, alternatively, an order requiring Xcentric to amend its Complaint again to provide a more definite statement as to her malice because, inter alia, The Amended Complaint remains ambiguous and vague regarding Ms. Borodkins alleged malice. Doc. #64 at 5. On July 17, 2012, the Court issued an order (Doc. #97) denying Ms. Borodkins Second Motion to Strike. In its order the Court specifically rejected Ms. Borodkins contention that the Complaint failed to allege facts sufficient to prove malice on her part: Borodkin further contends that Plaintiffs new theories of malice consist only of motives attributed to Ms. Borodkin and Mr. Blackerts alleged states of mind and do not furnish any facts of actions taken by Ms. Borodkin or Mr. Blackert that would allow a factfinder to arrive at these conclusions. (Doc. 64 at 6). However, Federal Rule of Civil Procedure 9(b) states that [m]alice, intent, knowledge, and other conditions of a persons mind may be alleged generally. See also Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) ([A] complaint need not contain detailed factual allegations; rather, it must plead enough facts to state a claim to relief that is plausible on its face.) 10
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(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Accordingly, at this stage of the litigation, Plaintiff need not identify a specific factual basis for Borodkins alleged state of mind. It is sufficient that Plaintiff has distinguished between Borodkins alleged improper motives for bringing the California Action and her clients motives for bringing the Action. July 17, 2012 order at 6:237:7 (empahsis added). Having raised the same argument unsuccessfully, this aspect of Ms. Borodkins motion should be summarily denied. Furthermore, by re-raising various arguments about Xcentrics alleged appalling business practices and by presenting her unilateral interpretation of Xcentrics Corporate Advocacy Program, again Ms. Borodkin is essentially trying to litigate the merits of this case without complying with the standards of Rule 56. This is inappropriate given that the existence of malice is a question of fact for the jury to determine. See RESTATEMENT (SECOND) OF TORTS 681B (explaining In an action for wrongful civil proceedings, subject to the control of the court, the jury determines: ... (b) whether the defendant acted primarily for a purpose other than that of securing the proper adjudication of the claim on which the proceeding was based ... .). Further, malice must often be established by inference; Since parties rarely admit an improper motive, malice is usually proven by circumstantial evidence and inferences drawn from the evidence. HMS Capital, Inc. v. Lawyers Title Co., 118 Cal.App.4th 204, 12 Cal.Rptr.3d 786 (Cal. 2nd App. Dist. 2004). In the context of Rule 12(b)(6), all inferences must be drawn in favor of Xcentric. As such, Ms. Borodkins argument is even less appropriate at this stage. III. CONCLUSION

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For each of these reasons, Ms. Borodkins Motion to Dismiss should be denied. DATED August 13, 2012. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorneys for Plaintiff

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

CERTIFICATE OF SERVICE

I hereby certify that on August 13, 2012 I electronically transmitted the attached document to the Clerks Office using the CM/ECF System for filing, and for transmittal of a Notice of Electronic Filing to the following: John S. Craiger, Esq. David E. Funkhouser III, Esq. Krystal M. Aspey, Esq. Quarles & Brady LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 Attorney for Defendant Lisa J. Borodkin Raymond Mobrez Iliana Llaneras PO BOX 3663 Santa Monica, CA 90408 Defendants Pro Se And a courtesy copy of the foregoing delivered to: HONORABLE G. MURRAY SNOW United States District Court Sandra Day OConnor U.S. Courthouse, Suite 622 401 West Washington Street, SPC 80 Phoenix, AZ 85003-215 /s/David S. Gingras

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