13-15544; 13-16271 (Consolidated)

IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

XCENTRIC VENTURES, LLC, Plaintiff/Appellant, v. LISA BORODKIN, et al., Defendant/Appellees. APPEAL FROM THE DISTRICT COURT OF ARIZONA HON. G. MURRAY SNOW CASE NO. 11-CV-1426

APPELLANTS CONSOLIDATED OPENING BRIEF

David S. Gingras, Esq. (SBN#: 021097) Gingras Law Office, PLLC 4802 E. Ray Road, #23-271 Phoenix, AZ 85044 Telephone: (480) 264-1400 Facsimile: (480) 248-3196 Email: David@GingrasLaw.com Attorney for Appellant XCENTRIC VENTURES, LLC

CORPORATE DISCLOSURE STATEMENT

Pursuant to Fed. R. App. P. 26.1, Appellant Xcentric Ventures, LLC states that its corporate parent is:

Creative Business Investment Concepts, Inc. 2533 North Carson Street Carson City, NV 89706

No publicly-held or publicly-traded company holds any interest in Xcentric Venture, and Creative Business Investment Concepts, Inc. is not publicly held or traded.

TABLE OF CONTENTS

STATEMENT OF JURISDICTION .............................................................. 1 ISSUES PRESENTED FOR REVIEW .......................................................... 2 STATEMENT OF THE CASE ...................................................................... 3 STATEMENT OF FACTS ............................................................................. 4 SUMMARY OF ARGUMENT.................................................................... 11 ARGUMENT................................................................................................ 12 Summary Judgment For The Mobrez Parties Was Improper................... 12 Standard of Review............................................................................... 14 Preliminary Comments Re: Standards For Probable Case ................... 14 Summary Judgment Cannot Be Affirmed Because The District Court Did Not Find Probable Cause As To Every Element Of The RICO/Extortion Claim............................................... 16 Factual Disputes Precluded Summary Judgment As To Issue Of Probable Cause For The RICO/Extortion Claim............................. 22 Substantial Evidence Showed That Mr. Mobrez And Ms. Llaneras Lied About The Material Facts Of Their RICO/Extortion Claim.......................................................................... 29 The May 5, 2009 Email Did Not Provide Probable Cause To Sue For RICO/Extortion ....................................................................... 36 The Order Dismissing Xcentrics Claims Against Ms. Borodkin And The Mobrez Parties Under Rule 12(b)/12(c) Was Improper............ 40 Standard Of Review.............................................................................. 40 Argument .............................................................................................. 42

The Court Abused Its Discretion by Denying Leave To Amend And Modification of the Case Management Order .................................. 55 Standard Of Review.............................................................................. 56 Argument .............................................................................................. 56 CONCLUSION............................................................................................. 63

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TABLE OF AUTHORITIES

CASES Ah Quin v. County of Kauai Dept. of Transp., --- F.3d ----, 2013 WL 3814916 (9th Cir. 2013)....................................... 22 Albertson v. Raboff, 46 Cal.2d 375, 295 P.2d 405 (Cal. 1956) ........................................... 15, 27 Arcaro v. Silva & Silva Enters. Corp., 77 Cal.App.4th 152, 91 Cal.Rptr.2d 433 (Cal.App. 2nd Dist. 1999).......... 17 Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2011 WL 2469822 (C.D.Cal. 2011) ........................................................... 7 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) .......................... 41 Bertero v. National General Corp, 13 Cal.3d 43, 118 Cal.Rptr. 184, 529 P.2d 608 (Cal. 1974) ............. passim Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009) ..................................................................... 53 Bravo v. City of Santa Maria, 665 F.3d 1076 (9th Cir. 2011) ................................................................... 14 Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336 (9th Cir. 1996) ....................................................................... 57 Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969 (9th Cir. 2008) ..................................................................... 19 Citi-Wide Preferred Couriers, Inc. v. Golden Eagle Ins., 114 Cal.App.4th 906, 8 Cal.Rptr.3d 199 (Cal.App. 2nd Dist. 2004).... 16, 27

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Cole v. Patricia A. Meyer & Assoc., APC, 206 Cal.App.4th 1095, 142 Cal.Rptr.3d 646 (Cal.App. 2nd Dist. 2012)... 38, 39, 46, 53 Crowley v. Katleman, 8 Cal.4th 666, 881 P.2d 1083, 34 Cal.Rptr.2d 386 (Cal. 1994) .... 15, 21, 43 Daniels v. Robbins, 182 Cal.App.4th 204, 105 Cal.Rptr.3d 683 (Cal.App. 4th Dist. 2010)17, 36, 49 Dennis v. Kellogg Co., 697 F.3d 858 (9th Cir. 2012) ..................................................................... 56 Drummond v. Desmarais, 176 Cal.App.4th 439, 98 Cal.Rptr.3d 183 (Cal.App. 6th Dist. 2009) ........ 24 Dworkin v. Hustler Magazine Inc., 867 F.2d 1188 (9th Cir. 1989) ................................................................... 41 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003) ............................................................. 57, 62 Fireman's Fund Ins. Co. v. Stites, 258 F.3d 1016 (9th Cir. 2001) ............................................................. 18, 52 Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962) .................................. 56 Franklin Mint Co. v. Manatt, Phelps & Phillips, LLP, 184 Cal.App.4th 313, 109 Cal.Rptr.3d 143 (Cal.App.4th Dist. 2010) . 24, 33 Franzen v. Shenk, 192 Cal. 572, 221 P. 932 (Cal. 1923) ................................................. 25, 27 Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002) ................................................................... 42 Gilbert v. Sykes, 147 Cal.App.4th 13, 53 Cal.Rptr.3d 752 (Cal.App. 3rd Dist. 2007) .......... 32 iv

Gilligan v. Jamco Development Corp., 108 F.3d 246 (9th Cir. 1997) ..................................................................... 41 Griggs v. Pace Amer. Group, Inc., 170 F.3d 877 (9th Cir. 1999) ..................................................................... 57 Grimmett v. Brown, 75 F.3d 506 (9th Cir. 1996) ....................................................................... 23 Heyer v. Governing Bd. of Mt. Diablo Unified School Dist., 2013 WL 1320499 (9th Cir. 2013) ........................................................... 40 Hindin v. Rust, 118 Cal.App.4th 1247, 13 Cal.Rptr.3d 668 (Cal.App. 2nd Dist. 2004)..... 20, 21, 22, 44 Hy Cite Corp v. Badbusinessbureau.com, L.L.C., 418 F.Supp.2d 1142 (D.Ariz. 2005) ................................................... 13, 37 Jay v. Mahaffey, 218 Cal.App.4th 1522, --- Cal.Rptr.3d ----, 2013 WL 4508710 (Cal.App.4th Dist. 2013)................................................................................................. 24 Johnson v. Mammoth Recreations, Inc., 975 F.2d 604 (9th Cir. 1992) ..................................................................... 62 Karnercom Too v. Ibar Development, LLC, 464 Fed.Appx. 588, 2011 WL 6778621 (9th Cir. 2011) ........................... 61 Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353 (9th Cir. 2005) ..................................................................... 17 Lyons v. Skolnik, 2013 WL 29395 (9th Cir. 2013) ................................................................ 61 Manufactured Home Communities, Inc. v. County of San Diego, 655 F.3d 1171 (9th Cir. 2011) ................................................................... 32 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025 (9th Cir. 2008) ................................................................... 40 v

Maxwell v. Lucky Const. Co., 710 F.2d 1395 (9th Cir. 1983) ................................................................... 62 Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049 (9th Cir. 2008) ................................................................... 56 Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011) ................................................................... 56 Nelson v. City of Davis, 571 F.3d 924 (9th Cir. 2009) ..................................................................... 14 Paramount General Hospital Co. v. Jay, 213 Cal.App.3d 360, 261 Cal.Rptr. 723 (Cal. 1989)................................ 45 Pochoda v. Arpaio, 2009 WL 1407543 (D.Ariz. 2009) ........................................................... 42 Polich v. Burlington Northern, Inc., 942 F.2d 1467 (9th Cir. 1991) ................................................................... 56 Puryear v. Golden Bear Ins. Co., 66 Cal.App.4th 1188, 78 Cal.Rptr.2d 507 (Cal.App. 3d Dist. 1998) ........ 17 Regional Care Services v. Companion Life Ins. Co., 2012 WL 1018937 (D.Ariz. 2012) ........................................................... 63 Rennie & Laughlin, Inc. v. Chrysler Corp., 242 F.2d 208 (9th Cir. 1957) ..................................................................... 41 Roberts v. McAfee, Inc., 660 F.3d 1156 (9th Cir. 2011) ................................................................... 25 Sangster v. Paetkau, 68 Cal.App.4th 151, 80 Cal.Rptr.2d 66 (Cal.App. 1st Dist. 1998) 15, 23, 46 Sedima, S.P.R.L. v. Imrex Company, Inc., 473 U.S. 479, 105 S.Ct. 3275 (1985)........................................................ 18

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Sheldon Appel Co. v. Albert & Oliker, 47 Cal.3d 863, 254 Cal.Rptr. 336, 765 P.2d 498 (Cal. 1989) 24, 25, 27, 28 Sierra Club Found. v. Graham, 72 Cal.App.4th 1135, 85 Cal.Rptr.2d 726 (Cal.App. 1st Dist. 1999) . 15, 23, 25, 45 Singleton v. Perry, 45 Cal.2d 489, 289 P.2d 794 (1955)......................................................... 45 Smith v. Jackson, 84 F.3d 1213 (9th Cir. 1996) ..................................................................... 42 Smith v. Pacific Prop. & Dev. Corp., 358 F.3d 1097 (9th Cir. 2004) ................................................................... 61 Soukup v. Law Offices of Herbert Hafif, 39 Cal.4th 260, 139 P.3d 30, 46 Cal.Rptr.3d 638 (Cal. 2006) ...... 15, 22, 39 U.S. ex rel. v. General Dynamics C4 Systems, Inc., 637 F.3d 1047 (9th Cir. 2011) ................................................................... 41 U.S. v. Corinthian Colleges, 655 F.3d 984 (9th Cir. 2011) ..................................................................... 62 U.S. v. Limmi Indian Tribe, 235 F.3d 443 (9th Cir. 2000) ..................................................................... 33 U.S. ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512 (9th Cir. 1995) ..................................................................... 57 United States v. SmithKline Beecham, Inc., 245 F.3d 1048 (9th Cir. 2001) ................................................................... 57 Videotape Plus, Inc. v. Lyons, 89 Cal.App.4th 156, 107 Cal.Rptr.2d 1 (Cal.App.2nd Dist. 2001)............. 25 Williams v. Coombs, 179 Cal.App.3d 626, 224 Cal.Rptr. 865 (Cal.App. 3rd Dist. 1986) .......... 33

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Xcentric Ventures, LLC v. Borodkin, 2013 WL 105257 (D.Ariz. 2013) ............................................................... 6 Zamos v. Stroud, 32 Cal.4th 958, 12 Cal.Rptr.3d 54, 87 P.3d 802 (Cal. 2004) .............. 24, 51 Zimmerman v. City of Oakland, 255 F.3d 734 (9th Cir. 2001) ..................................................................... 42

STATUTES 18 U.S.C. 1962(c) ................................................................................ 17, 20 28 U.S.C. 1291............................................................................................. 1 28 U.S.C. 1332............................................................................................. 1 Cal. Bus. & Prof. Code, 17200. ............................................... 38, 47, 52, 55 Cal. Code Civ. P. 425.16 ................................................................. 9, 31, 38 Cal. Code Civ. P. 437c(o).......................................................................... 17

RULES Fed. R. Civ. P. 12(b)(6) ......................................................................... passim Fed. R. Civ. P. 12(c) ............................................................................... 40, 55 Fed. R. Civ. P. 16(b) ..................................................................................... 62 Fed. R. Civ. P. 8(a) ....................................................................................... 41 Fed. R. Civ. P. 9(b) ....................................................................................... 42 Fed. R. Civ. P. 16(b)(4) ................................................................................ 63

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STATEMENT OF JURISDICTION On July 18, 2011 Plaintiff/Appellant Xcentric Ventures, LLC (Xcentric) filed a lawsuit in the Arizona District Court against Defendant/Appellee Lisa Jean Borodkin (Ms. Borodkin) and several codefendants including Appellees Raymond Mobrez (Mr. Mobrez) and Iliana Llaneras (Ms. Llaneras; collectively the Mobrez Parties). See Appellants Excerpts of Record (ER) at ER Tab 10. Diversity jurisdiction was asserted under 28 U.S.C. 1332. On November 8, 2012, the district court dismissed Xcentrics claims against Ms. Borodkin pursuant to Fed. R. Civ. P. 12(b)(6). ER Tab 4. After finding no just cause existed for delay, a Rule 54(b) judgment was entered in favor of Ms. Borodkin on March 25, 2013. ER Tab 16. Xcentrics Notice of Appeal as to Ms. Borodkin was timely filed on March 25, 2013. ER Tab 15. The Court of Appeals has jurisdiction pursuant to 28 U.S.C. 1291 from the final order of the district court. On June 17, 2013, the district court issued an order granting summary judgment in favor of the Mobrez Parties as to all remaining issues. ER Tab 1. A final judgment was entered that same day. ER Tab 12. Xcentrics Notice of Appeal as to the Mobrez Parties was timely filed on June 19, 2013. ER Tab 11. This Court has jurisdiction pursuant to 28 U.S.C. 1291.

ISSUES PRESENTED FOR REVIEW 1. Did the district court err in granting summary judgment in favor

of Appellees Raymond Mobrez and Illiana Llaneras based on its conclusion that the undisputed facts showed they had probable cause to sue Xcentric for racketeering predicted upon attempted extortion? 2. Did Xcentrics complaint contain sufficient facts to state a

claim for malicious prosecution as to the non-extortion claims in the underlying proceeding? 3. Did the district court abuse its discretion by denying leave to

amend based solely on the expiration of the case management orders pleading amendment deadline which expired before any Rule 12(b)(6) motion was filed? 4. Did the district court abuse its discretion by denying Xcentrics

request to extend the pleading amendment deadline in the case management order?

STATEMENT OF THE CASE This is a malicious prosecution case brought against former plaintiffs, Raymond Mobrez and Iliana Llaneras, and their attorney, Lisa Borodkin. In the case below, Xcentrics claims against Ms. Borodkin were dismissed pursuant to Rule 12(b)(6) without leave to amend. Leave to amend was denied solely because a pre-existing amendment deadline set by case management order expired before Ms. Borodkins motion to dismiss was filed. Xcentric contends the dismissal of its claims against Ms.

Borodkins was improper and that the denial of leave to amend was an abuse of discretion. Xcentrics claims against the Mobrez Parties were resolved in part by Rule 12 dismissal (also without leave to amend) and in part by summary judgment. Xcentric contends both rulings were erroneous. Xcentric further contends the district court abused its discretion by denying leave to amend as to the Mobrez Parties.

STATEMENT OF FACTS The background of the case and the prior action from which it arises are both unusually complex and convoluted. With this in mind, the

necessary background facts are presented as succinctly as possible. Appellant Xcentric Ventures operates a well-known consumer complaint website called www.RipoffReport.com. This is a malicious

prosecution case arising from a lawsuit filed in California in 2010 styled Asia Economic Institute, LLC v. Xcentric Ventures, LLC, Case No. 10-cv1360 (C.D.Cal.) (the Asia litigation). In short, the Asia litigation involved federal racketeering (RICO) and numerous other claims against Xcentric and its principal, Edward Magedson, predicated on an alleged pattern of extortion and wire fraud, among other things. The plaintiffs were Appellees Raymond Mobrez (Mr. Mobrez), his wife Iliana Llaneras (Ms. Llaneras; collectively, the Mobrez Parties) and their entity Asia Economic Institute, LLC (AEI).1 Their lead attorney was Appellee Lisa Borodkin (Ms.

Borodkin) who appeared in the Asia litigation shortly after it began. A copy of the original complaint filed in the Asia litigation (excluding certain exhibits not germane to this appeal) is located in Appellants excerpts of record (ER) at Tab 10, pages ER313345.

AEI defaulted in the malicious prosecution case and is not a party here. 4

Generally speaking, in the Asia litigation Mr. Mobrez and Ms. Llaneras claimed to be victims of several false and defamatory complaints posted on www.RipoffReport.com by third parties. They further claimed that when Mr. Mobrez contacted Mr. Magedson to inquire about how the complaints could be removed, Mr. Magedson responded by demanding a payment of $5,000.00 plus monthly payments of several hundred dollars. This demand for money allegedly occurred during a telephone call from Mr. Mobrez to Mr. Magedson on May 5, 2009. In response to a court order issued at Xcentrics request, Mr. Mobrez filed a sworn declaration, ER Tab 10 at ER349355, describing, in detail, the contents of his phone conversations with Mr. Magedson in April and May 2009 during which the alleged extortion occurred. Ms. Llaneras also filed a sworn declaration, ER Tab 10 at ER357359 avowing that she was secretly listening to several of these conversations including the May 5, 2009 call during which Mr. Magedson allegedly demanded money. Ms. Llaneras not only corroborated Mr. Mobrezs version of the discussions, she also produced handwritten notes created while she listened to each all. These notes appeared to confirm that Ms. Llaneras heard Mr. Magedson demand a payment of $5,000.00 plus monthly payments of several hundred from Mr. Mobrez on May 5, 2009. ER Tab 10 at ER359 & 363.

After these declarations were filed, Xcentric deposed Mr. Mobrez and asked him if all aspects of his story were true. He said yes. Xcentric subsequently informed Mr. Mobrez that all of his telephone conversations with Mr. Magedson were secretly recorded by Xcentrics phone system.2 These recordings revealed that virtually every material

aspect of Mr. Mobrezs and Ms. Llanerass sworn declarations was false. Most importantly, these recordings unequivocally showed that at no time was Mr. Mobrez ever asked for money either $5,000.00 or any other amount, either on May 5, 2009 or at any other time. Despite being caught in a lie, Mr. Mobrez and Ms. Llaneras refused to capitulate. Instead, they claimed they were confused, suggesting that many of the things they claimed Mr. Magedson said on the phone were actually found in an email he sent and/or various pages on the Ripoff Report website. Mr. Mobrez and Ms. Llaneras each filed corrected declarations purporting to clarify their stories. ER Tab 10 at ER375378 & 383385. After the Mobrez Parties refused to withdraw their RICO/extortion claim, Xcentric moved for summary judgment. The California district court granted the motion as to the RICO/extortion claim, finding no evidence of extortion. See 2010 WL 4977054 (C.D.Cal. 2010). Arizona is a one party state which expressly allows this practice. See Xcentric Ventures, LLC v. Borodkin, 2013 WL 105257 (D.Ariz. 2013). 6
2

Despite this, and despite other admissions3 showing that other claims were groundless for independent reasons, the Mobrez Parties refused to relent. Instead, they sought to drastically expand the litigation by filing an 84-page first amended complaint containing 371 paragraphs of new factual allegations and new legal theories. ER Tab 8 at ER169252. Xcentric subsequently moved for summary judgment as to all claims which the California district court granted in full. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2011 WL 2469822 (C.D.Cal. 2011). Immediately after the Asia litigation was terminated in its favor, Xcentric commenced this action in the Arizona district court for malicious prosecution against the Mobrez Parties, Ms. Borodkin, and her former cocounsel, Daniel Blackert.4 Following service of the summons and complaint, Ms. Borodin and the Mobrez Parties filed an exceptional number of pre-answer motions more than twenty in all. This included successive motions challenging Among other things, in his deposition Mr. Mobrez admitted that despite nine years in operation, AEI had revenues of $0 and profits of $0. Mr. Mobrez further testified that at no time did AEI ever attempt to conduct any business of any kind, either before the alleged extortion or after. ER Tab 19 at ER612619. Xcentric contends this admission would have been fatal to any claim, including the two federal RICO claims, which required proof of actual loss to the plaintiffs business or property. Mr. Blackert defaulted in the malicious prosecution case and is not a party to this appeal. ER Tab 24 at ER663; Docket Entry #127. 7
4 3

personal jurisdiction/venue, motions to strike, motions for a more definite statement (twice), motions for sanctions, motions to dismiss for failure to state a claim, and multiple motions requesting extensions of time to plead. While essentially all the substantive motions were denied, on November 8, 2012, nearly 15 months after the action began, the district court granted Ms. Borodkins Rule 12(b)(6) motion to dismiss, finding Xcentrics first amended complaint (FAC; ER Tab 9) failed to contain sufficient facts to state a claim against her. Xcentric requested leave to amend which the district court denied on December 18, 2012. ER Tab 3. The denial was based solely on a preexisting deadline for amending the pleadings set by case management order which expired on July 23, 2012, more than a week before Ms. Borodkins 12(b)(6) motion was filed. Despite this, the district court refused to grant leave to amend. After the initial request to amend was denied, Xcentric moved to modify the amendment deadline in the CMO based on good cause and renewed its request to amend. On March 20, 2013, the district court denied both requests. ER Tab 2. On March 25, 2013, a Rule 54(b) final judgment was entered in favor of Ms. Borodkin. ER Tab 16.

Twenty days after Ms. Borodkins Rule 12(b)(6) motion was granted, on November 28, 2012, the Mobrez Parties filed a virtually identical motion to dismiss arguing that the operative pleadingXcentrics FACfailed to state a claim against them for the same reasons which resulted in Ms. Borodkins dismissal. While that motion was pending, on December 6, 2012, the Mobrez Parties also filed a special motion to strike (also known as an anti-SLAPP motion) pursuant to Cal. Code Civ. P. 425.16 followed by a motion for summary judgment on December 28, 2012. 5 On March 20, 2013, the district court denied the Mobrez Parties antiSLAPP motion, finding Xcentric has stated and substantiated a legally sufficient claim for wrongful initiation of civil proceedings based on the extortion claim. It has therefore carried its burden to show that there is a probability that the plaintiff will prevail on the claim. 2013 WL 1149917, *4 (D.Ariz. 2013); ER Tab 2 at ER2425 (emphasis added). However, in the same order the court found that Xcentrics FAC failed to contain sufficient detail explaining why the Mobrez Parties other claims in the Asia litigation lacked probable cause. The court therefore granted their motion to dismiss to the extent it was based on any claims other than RICO/extortion.

Although Xcentrics malicious prosecution action was filed in Arizona, the district court held that California substantive law applied. See 2012 WL 692976, *5; ER Tab 7 at ER 91. 9

As before, Xcentric sought leave to amend to provide additional factual support for its claims, but the district court denied that request. ER Tab 1. The net effect was to preclude Xcentric from pursuing its malicious prosecution claims as to any of the non-extortion theories asserted in the prior California case. On June 17, 2013, the district court granted summary judgment in favor of the Mobrez Parties as to that remaining aspect of the case. In its holding, ER Tab 1, the court noted the existence of numerous factual disputes, but it found that even if the Mobrez Parties lied about the details of their RICO/extortion claim, other evidence existed to support that claim. Xcentric contends this ruling directly conflicts with the courts earlier March 20, 2013 order which found that Xcentric had stated and substantiated a legally sufficient claim for malicious prosecution. Xcentric now appeals the summary judgment ruling as well as the prior dismissal of its claims against Ms. Borodkin and the Mobrez Parties and the district courts denial of leave to amend.

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SUMMARY OF ARGUMENT The district court erred here in several fundamental ways. First, it

applied an improperly strict pleading standard to Xcentrics complaint far beyond the short and plain statement requirements of Rule 8. Additionally, the court construed doubts and inferences in favor of defendants when, in fact, those matters should have been resolved in Xcentrics favor. Under the well-worn standards of Rule 8 and Rule 12, Xcentrics complaint was more than sufficient to state a claim. Second, even assuming the complaint lacked sufficient facts to state a claim, the court abused its discretion by refusing to allow Xcentric to amend and by refusing to extend the Case Management Orders amendment deadline which expired before defendants motions to dismiss were filed. The timing of these events occurred through no fault of Xcentric and over Xcentrics objections. Finally, summary judgment in favor of the Mobrez Parties was improper for numerous reasons. First, the court erred as a mater of law by applying the incorrect legal test for probable cause. Second, the material facts were disputed. Third, to the extent a handful of points were not disputed, those facts did not establish a sufficient basis for any of the claims

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ARGUMENT I. SUMMARY JUDGMENT FOR THE MOBREZ PARTIES WAS IMPROPER As noted above, on June 17, 2013 the district court granted summary judgment in favor of the Mobrez Parties. ER Tab 1. In doing so, the court limited its discussion to the narrow question of whether probable cause existed for a single claimRICO/extortion. Although Xcentric alleged that all twelve claims asserted against it by the Mobrez Parties were groundless, no other claims were discussed in the summary judgment order such as wire fraud, California state-law fraud, or tortious interference. The narrow scope of the courts summary judgment analysis was due to a prior order dated March 20, 2013, Xcentric Ventures, LLC v. Borodkin, -- F.Supp.2d ----, 2013 WL 1149917 (D.Ariz. 2013); ER Tab 2, which disposed of those other issues. In the March order, the court found Xcentric failed to allege sufficient facts showing why the Mobrez Parties eleven other claims were groundless. It therefore dismissed Xcentrics malicious prosecution claim without leave to amend to the extent it was based on any claims except extortion.6 See Xcentric Ventures, LLC v. Borodkin, ---

F.Supp.2d ----, 2013 WL 1149917, *10 (D.Ariz. 2013); ER Tab 2 at ER33.

Xcentric also appeals this aspect of the district courts orders which is discussed further infra. 12

As for the summary judgment order itself, this ruling was premised on the idea that even if Mr. Mobrez and Ms. Llaneras lied about some (or even most) of the facts, they did not lie about one solitary detaila single email from Xcentric dated May 5, 2009, Tab 17; ER53844, which included a brief reference to its Corporate Advocacy Program at ER543. Based on that single email and other unidentified pages from Xcentrics website, the court found the Mobrez Parties had factual probable cause to sue Xcentric for racketeering predicated on a pattern of extortion. The court further held that legal probable cause was provided by a single caseHy Cite Corp v. Badbusinessbureau.com, L.L.C., 418 F.Supp.2d 1142 (D.Ariz. 2005). These conclusions were both incorrect for several reasons. First, the material facts underlying the extortion claim were, contrary to the district courts view, substantially conflicting. Second, although the fact that

Xcentric sent the May 5th email to Mr. Mobrez was not disputed, nothing in that email remotely established probable cause for the RICO/extortion claim, either as it was actually presented or at all. Third, the courts summary judgment analysis ignored additional facts which independently defeated probable cause even assuming arguendo that the courts other conclusions were sound. For these reasons, summary judgment was improper and the courts order should be reversed.

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A.

Standard of Review

An order granting summary judgment is reviewed de novo. See Bravo v. City of Santa Maria, 665 F.3d 1076, 1083 (9th Cir. 2011). Such review asks whether [v]iewing the evidence and drawing all inferences in the light most favorable to the non-moving party whether any genuine issues of material fact remain and whether the district court correctly applied the relevant substantive law. Bravo, 665 F.3d at 1083. In addition, [i]f a rational trier of fact could resolve a genuine issue of material fact in the nonmoving partys favor, the [appellate] court may not affirm a grant of summary judgment ... because credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge. Id. (quoting Nelson v. City of Davis, 571 F.3d 924, 927 (9th Cir. 2009) (internal quotation marks omitted). B. Preliminary Comments Re: Standards For Probable Case

In addition to other elements, malicious prosecution requires proof that the prior lawsuit included one or more claims lacking in probable cause, either factually or legally. As the district court here correctly noted, this is generally shown in one of two ways: A litigant will lack probable cause for his action either [1] if he relies upon facts which he has no reasonable cause to believe to be true, or [2] if he seeks recovery upon a 14

legal theory which is untenable under the facts known to him. Borodkin, 2013 WL 3034267, *5 (D.Ariz. 2013) (quoting Sangster v. Paetkau, 80 Cal.Rptr.2d 66, 75 (Cal.App. 1st Dist. 1998)). Thus, even when a claim is supported by the law, it may lack probable cause due to an absence of a factual basis, or vice versa. Further, to avoid liability for malicious prosecution, Probable cause must exist for every cause of action advanced in the underlying action. [A]n action for malicious prosecution lies when but one of alternate theories of recovery is maliciously asserted ... . Soukup v. Law Offices of Herbert Hafif, 39 Cal.4th 260, 292, 139 P.3d 30, 51, 46 Cal.Rptr.3d 638, 663 (Cal. 2006) (emphasis added) (quoting Bertero v. National General Corp., 13 Cal.3d 43, 57, n.5, 118 Cal.Rptr. 184, 529 P.2d 608 (Cal. 1974)); see also Crowley v. Katleman, 8 Cal.4th 666, 881 P.2d 1083, 34 Cal.Rptr.2d 386 (Cal. 1994) (confirming, a defendant cannot escape liability for the malicious prosecution of an unjustified charge by joining with it a justified charge .) (quoting Albertson v. Raboff, 46 Cal.2d 375, 295 P.2d 405 (Cal. 1956)); Sierra Club Found. v. Graham, 72 Cal.App.4th 1135, 1153, 85 Cal.Rptr.2d 726, 737 (Cal.App. 1st Dist. 1999) (agreeing, to establish a lack of probable cause, the malicious prosecution plaintiff need not demonstrate that the entire underlying proceeding was utterly groundless.)

15

Likewise, probable cause must exist not only for each claim and theory asserted, but also for the amount of damages sought; 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, Inc. v. Golden Eagle Ins. Co., 114 Cal.App.4th 906, 914, 8 Cal.Rptr.3d 199, 205 (Cal.App. 2nd Dist. 2004). With these standards in mind and as explained further below, the district court erred when it granted summary judgment in favor of the Mobrez Parties based on its conclusion that probable cause existed as to just one element of their RICO/extortion claim. This holding was simply wrong. As such, the lower courts grant of summary judgment should be reversed. C. Summary Judgment Cannot Be Affirmed Because The District Court Did Not Find Probable Cause As To Every Element Of The RICO/Extortion Claim

Although certain aspects of this appeal are complicated, one threshold dispositive issue is noteven if every other point in the lower courts analysis was correct, reversal is still appropriate. This is so because when the court granted summary judgment on the issue of whether probable cause existed for the RICO/extortion claim, it applied the wrong legal standard. 16

In short, the court held that if probable cause existed for any one element of that claim, that fact was fatal to Xcentrics case. This turned the correct standard on its head. To avoid liability for malicious prosecution, the proponent of a claim must have evidence (or information reasonably suggesting the existence of such evidence) sufficient to support all elements of that claim, not just one:

[P]robable cause requires evidence sufficient to prevail in the action or at least information reasonably warranting an inference there is such evidence. To put it another way, probable cause is lacking when a prospective plaintiff and counsel do not have evidence sufficient to uphold a favorable judgment or information affording an inference that such evidence can be obtained for trial. Arcaro v. Silva & Silva Enters. Corp., 77 Cal.App.4th 152, 15657 91 Cal.Rptr.2d 433, 436 (Cal.App. 2nd Dist. 1999) (emphasis added) (quoting Puryear v. Golden Bear Ins. Co., 66 Cal.App.4th 1188, 1195, 78 Cal.Rptr.2d 507 (Cal.App. 3d Dist. 1998)); see also Daniels v. Robbins, 182 Cal.App.4th 204, 222, 105 Cal.Rptr.3d 683, 697 (Cal.App. 4th Dist. 2010) (same). It is axiomatic that if a claim contains multiple separate elements, as most claims do, a party cannot prevail without evidence sufficient to prove all elements of that claim. Where there is a complete and total absence of evidence of one or more mandatory elements of a claim, the proponent of that claim cannot possibly prevail. See, e.g., Cal. Code Civ. P. 437c(o) 17

(explaining A cause of action has no merit if [o]ne or more of the elements of the cause of action cannot be separately established, even if that element is separately pleaded.) Here, the district court ignored this most basic principle. Instead, the court found that as long as the Mobrez Parties had any evidence to support any one element of their RICO/extortion claim, such as evidence showing a single predicate act of extortion, then probable cause existed for the entire RICO claim without regard to the other elements. This is incorrect. A civil RICO claim under 18 U.S.C. 1962(c) contains five separate elements: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as predicate acts) (5) causing injury to plaintiffs business or property. Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)). The causation/damages element of RICO claims is both strictly construed and mandatory; [a] defendant who violates section 1962 is not liable for treble damages to everyone he might have injured by other conduct, nor is the defendant liable to those who have not been injured. Sedima, S.P.R.L. v. Imrex Company, Inc., 473 U.S. 479, 49697, 105 S.Ct. 3275, 3285 (1985) (emphasis added); see also Firemans Fund Ins. Co. v. Stites, 258 F.3d 1016, 1021 (9th Cir. 2001) (explaining to

18

establish RICO damages the plaintiff must show that he has suffered a concrete financial loss by documenting the amount of damages to which he is entitled.); Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969, 975 (9th Cir. 2008) (agreeing, Without a harm to a specific business or property interest there is no injury to business or property within the meaning of RICO.) Here, the district court began and ended its analysis with a single elementthe predicate act of extortion. The court did not discuss much less determine whether any evidence existed as to any other elements of the tort, such as harm actually and proximately caused to a specific business or property interest. Instead, the court held that based on a single email dated May 5, 2009, Tab 17; ER53844, and certain unidentified pages from Xcentrics website, the Mobrez Parties argument that one of Xcentrics paid programs known as the Corporate Advocacy Program or CAP amounted to a form of extortion was not so absurd that no reasonable attorney would have advanced it. 2013 WL 3034267, *8; ER Tab 1 at ER8. Upon reaching that conclusion, the district court stopped its analysis and found the Mobrez Parties had probable cause to bring their RICO/extortion claim. Thus, the court found Xcentrics malicious prosecution claim failed as a matter of law.

19

Even assuming arguendo that the court correctly determined there was probable cause to allege the predicate act, that one fact standing alone could never, without more, support the claim actually assertedi.e., that Xcentric was liable under 18 U.S.C. 1962(c) by virtue of conducting an enterprise involving a pattern of racketeering activity (to wit: extortion) which actually and proximately caused injury to the Mobrez Parties business or property. For this reason, even if there was probable cause to allege that the May 5, 2009 email contained an extortionate threat, which it did not,7 this point was not dispositive of Xcentrics claims. This is so because there was no evidence to establish the other four elements of that tort. This conclusion is analogous to the outcome discussed in Hindin v. Rust, 118 Cal.App.4th 1247, 13 Cal.Rptr.3d 668 (Cal.App. 2nd Dist. 2004). Hindin involved a malicious prosecution claim against insurance company State Farm by several attorneys. The underlying lawsuit involved two

claims: 1.) restitution of a fraudulently obtained $30 million settlement

In the underlying case, the California district court expressly determined that no such threat appeared in any email correspondence from Xcentric to the Mobrez Parties. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054, *17 (C.D.Cal. 2010) (finding there is no evidence that Defendants ever threatened to impute to Plaintiffs any disgrace or to expose a secret affecting Plaintiffs . Nothing even coming close to such a threat appears in any of the emails to Plaintiffs.) (emphasis added). 20

payment; and 2.) return of various documents. It was quickly determined that probable cause did not exist for State Farms second theory involving the recovery of documents, and State Farm voluntarily withdrew that theory 45 days later. See Hindin, 118 Cal.App.4th at 1253. The remaining claim was resolved against State Farm on the merits. After the original case was resolved in defendants favor, they sued State Farm for malicious prosecution. Summary judgment was subsequently entered in favor of State Farm on the grounds that probable cause existed for its theory relating to the fraudulently obtained $30 million payment. The California Court of Appeal reversed, finding that even if probable cause existed for the $30 million restitution claim, this did not absolve State Farm from liability for malicious prosecution without proof that both claims were supported by probable cause; a defendant cannot escape liability by showing partial probable cause for the underlying action. Hindin, 118 Cal.App.4th at 1259, 13 Cal.Rptr.3d at 677 (emphasis added) (quoting Crowley, supra, 8 Cal.4th at 682). The Hindin court further explained:

It follows then that [in a malicious prosecution action] a motion for summary adjudication purporting to establish that some but not all of the multiple grounds for liability asserted in the prior action were brought with probable cause is improper for failure to completely dispose of an entire cause of action . Hindin, 118 Cal.App.4th at 1259 (emphasis added). 21

Although Hindin focused on claims rather than elements of claims, the same logic applies either way. As noted above, Probable cause must exist for every cause of action advanced in the underlying action. [A]n action for malicious prosecution lies when but one of alternate theories of recovery is maliciously asserted ... . Soukup, 39 Cal.4th at 292, 139 P.3d at 51 (emphasis added). By definition, probable cause for a claim cannot exist in part. Thus, when there is no evidence to support one or more required elements of a claim, probable cause does not exist for that claim. Here, the district court applied the opposite standardit held that as long as any evidence existed as to any single element of a RICO/extortion claim, the claim did not lack probable cause. This holding was a

misapplication of the law which requires reversal of the lower courts order. See Ah Quin v. County of Kauai Dept. of Transp., --- F.3d ----, 2013 WL 3814916, *9 (9th Cir. 2013). D. Factual Disputes Precluded Summary Judgment As To Issue Of Probable Cause For The RICO/Extortion Claim

Turning to the more complex points, the district court also erred because it granted summary judgment in favor of the Mobrez Parties even though virtually all the material facts were conflicting. This was improper.

22

As a corollary to the rule that probable cause does not exist if a party relies upon facts which he has no reasonable cause to believe to be true, probable cause never exists when the defendant knowingly lies about the facts; 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, 72 Cal.App.4th at 115354, 85 Cal.Rptr.2d at 737 (citing Sangster, 68 Cal.App.4th at 16465); see also Bertero, 13 Cal.3d at 55, 529 P.2d at 617, 118 Cal.Rptr. at 194 (confirming, if the initiator knows that his claim is groundless he cannot have an actual or honest belief in its validity, and he may not escape liability for commencing an action based on such a claim merely because a reasonable man might have believed it was meritorious.). Thus, when a court is faced with determining whether probable cause existed, the analysis must always begin with a simple threshold question: Are the material facts disputed? The answer to that question controls

whether the court may decide the issue as a matter of law, or whether the factual disputes must first be submitted to a jury before the court can pass on the claims legal tenability. Ifand only ifthe facts are undisputed, [t]he existence or absence of probable cause is a question of law to be determined by the court .

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Franklin Mint Co. v. Manatt, Phelps & Phillips, LLP, 184 Cal.App.4th 313, 333, 109 Cal.Rptr.3d 143, 161 (Cal.App.4th Dist. 2010) (citing Sheldon Appel Co. v. Albert & Oliker, 47 Cal.3d 863, 875, 254 Cal.Rptr. 336, 765 P.2d 498 (Cal. 1989)). This determination requires the court to consider the undisputed facts and then evaluate this question of law under an objective standard, asking whether any reasonable attorney would have thought the claim tenable. Jay v. Mahaffey, 218 Cal.App.4th 1522, --- Cal.Rptr.3d ----, 2013 WL 4508710, *10 (Cal.App.4th Dist. 2013) (citing Zamos v. Stroud, 32 Cal.4th 958, 969, 12 Cal.Rptr.3d 54, 87 P.3d 802 (Cal. 2004)). But again, as is true in any Rule 56 context, summary judgment on the issue of probable cause is improper when the material facts are disputed. This includes the material fact of whether the defendant knew his claims were premised on falsehoods; 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, 47 Cal.3d at 881, 765 P.2d at 508, 254 Cal.Rptr. at 346 (emphasis added); see also Drummond v. Desmarais, 176 Cal.App.4th 439, 453, 98 Cal.Rptr.3d 183, 194 (Cal.App. 6th Dist. 2009) (agreeing, If there is a dispute concerning the facts or beliefs on which the former plaintiff acted, that question must be

24

resolved by a trier of fact.) (citing Videotape Plus, Inc. v. Lyons, 89 Cal.App.4th 156, 161, 107 Cal.Rptr.2d 1, 4 (Cal.App.2nd Dist. 2001); Roberts v. McAfee, Inc., 660 F.3d 1156, 1164 (9th Cir. 2011) (explaining, What facts the defendant knew is an issue of fact for the jury .) In short, probable cause can be a question of law measured by an objective standard, but only when all material facts are undisputed including the defendants awareness that his claim was fabricated. Thus, when there is evidence that the defendant may have known that the factual allegations on which his action depended were untrue, the jury must determine what facts the defendant knew before the trial court can determine the legal question whether such facts constituted probable cause to institute the challenged proceeding. Sheldon Appel, 47 Cal.3d at 881 (citing

Franzen v. Shenk 192 Cal. 572, 221 P. 932 (Cal. 1923)); see also Sierra Club, 72 Cal.App.4th at 1154, 85 Cal.Rptr.2d at 737 (same). Despite agreeing there was substantial evidence showing the Mobrez Parties lied about the facts of their extortion claim, 2013 WL 3034267, *6; ER Tab 1 at ER 10, the court disregarded these disputes and held that probable cause existed for the extortion claim even assuming they lied about the facts. This holding resulted from the courts decision to disregard the core facts manufactured by Mr. Mobrez and Ms. Llaneras, as

25

well as the courts erroneous legal conclusion that probable cause is always measured only by an objective standard and that the subjective knowledge or beliefs of the litigant is always irrelevant. See Borodkin, 2013 WL 3034267, *6; ER Tab 1 at ER11 (disregarding Mobrez Parties actual beliefs and mistakenly concluding, California law is clear that Xcentrics case fails if there are any undisputed facts objectively establishing, as a matter of law, that any reasonable attorney would have thought the claims ... were tenable.) (emphasis in original) (quoting Sangster, 80 Cal.Rptr.2d at 7). The district court also emphasized and relied upon this same erroneous belief in its November 8, 2012 order granting Ms. Borodkins Rule 12(b)(6) motion to dismiss; In its Response, Xcentric incorrectly argues that the existence of probable cause is a subjective inquiry improper for resolution at the 12(b)(6) stage.) Borodkin, 2012 WL 5465000, *5 n.7 (D.Ariz. 2012) (emphasis added); ER Tab 4 at ER61. As explained further below, this legal aspect of the courts holding was fundamentally wrong. This is so because contrary to the districts court view, probable cause does include a subjective requirement that a defendant must actually believe in the truth of his factual allegations and, by extension, a corresponding rule that probable cause does not exist when the defendant knows the facts he is asserting are false:

26

[A]lthough the existence of probable cause is determined in part by an objective testwhether the party filing suit had a suspicion founded upon circumstances sufficiently strong to warrant a reasonable man in the belief that the charge [was] truea jury must be told that [i]f a person initiating a judicial proceeding does not have an actual and honest belief in the validity of the claim asserted by him then he does not have ... probable cause to initiate such proceedings. Citi-Wide Preferred Couriers, 114 Cal.App.4th at 91213, 8 Cal.Rptr.3d at 204 (internal quotation marks omitted) (emphasis added) (quoting Bertero, 13 Cal.3d at 55). Indeedin Sheldon Appel, the California Supreme Court discussed this point extensively under the heading Objective or Subjective Nature of Probable Cause Element. In that lengthy section, the court expressly

reaffirmed the subjective component of probable cause:

[P]ast decisions of our own court are not as clear as they might be with respect to the objective versus subjective nature of the probable cause element . As we explain, while our decisions do indicate that in some cases the defendants subjective belief may be relevant to the probable cause issue, in all of the cases the belief in question related to the defendants belief in, or knowledge of, a given state of facts, and not to the defendants belief in, or evaluation of, the legal merits of the claim. Sheldon Appel, 47 Cal.3d at 879, 765 P.2d at 506, 254 Cal.Rptr. at 345 (emphasis added) (internal citations omitted) (citing Franzen v. Shenk, 192 Cal. 572, 221 P. 932 (Cal. 1923); Raboff, 46 Cal.2d at 382; Bertero, 13 27

Cal.3d at 55). Restated simply, Xcentric agrees that whether the Mobrez Parties subjectively believed their claims were legally tenable is not relevant. As non-lawyers, their (mis)understanding of the law does not matter. On the other hand, as the California Supreme Court explained in Sheldon Appel, if a defendant does not actually believe the facts he is asserting are true or, worse, if there is evidence that he knew the facts asserted were not true, this subjective belief is an issue of fact that must be submitted to a jury; when there is evidence that the defendant may have known that the factual allegations on which his action depended were untrue, the jury must determine what facts the defendant knew before the trial court can determine the legal question whether such facts constituted probable cause to institute the challenged proceeding. Sheldon Appel, 47 Cal.3d at 881, 765 P.2d at 508, 254 Cal.Rptr. at 346. Here, as the district court expressly noted, There is evidence that the AEI Plaintiffs made false statements to support their extortion claim. 2013 WL 3034267, *9; ER Tab 1 at ER15. If a jury agreed with that conclusion, this would compel a finding that Mr. Mobrez and Ms. Llaneras did not have a reasonable belief in those facts and by extension did not have probable cause to assert an extortion claim based on those facts. As such, a triable issue of fact existed that should have precluded summary judgment.

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1.

Substantial Evidence Showed That Mr. Mobrez And Ms. Llaneras Lied About The Material Facts Of Their RICO/Extortion Claim

As explained above, probable cause can be resolved by the court as a matter of law, but with one significant restrictionthe underlying facts including facts relating to the defendants subjective knowledge and belief of the truth must all be undisputed. This was certainly not the case here. Further, probable cause can never exist when a party fabricates the factual basis for his claims and therefore knows his claim is factually groundless. In this case, substantial evidence showed the Mobrez Parties blatantly lied about essentially all the material facts of their RICO/extortion claim and thus, as a matter of law, they lacked probable cause for that claim. Indeed, the district court conceded as much: Xcentrics argument that the extortion claim lacked probable cause centers on the AEI Plaintiffs claim in the California Complaint and later declarations about their conversations with Magedson. There is substantial evidence those statements were false. There is thus a factual dispute surrounding the declarations, their content, and the AEI Plaintiffs state of mind. Borodkin, 2013 WL 3034267, *6; ER Tab 1 at ER11 (emphasis added). Ordinarily, this finding would end the discussion and summary judgment would be denied. Instead, the district court overcame that problem by concluding that the factual disputes were not material; i.e., that they had no effect on the extortion claim because the claim was not based on the 29

details falsified by the Mobrez Parties; The AEI Plaintiffs may have made false statementseven liedabout some of the facts. But their case did not depend on those statements. Their lawsuit challenged the CAP and how it functioned. Borodkin, 2013 WL 3034267, *6; ER Tab 1 at ER1516. (emphasis added). This conclusion is factually untrue and legally irrelevant. Factually, shortly before its June 17, 2013 order granting summary judgment, the district court reached exactly the opposite conclusion finding that the Mobrez Parties extortion claim was primarily based on the alleged phone conversations between Mr. Mobrez and Mr. Magedson. Specifically, on March 20, 2013, the court denied, in part, an earlier motion for judgment on the pleadings which involved virtually the same arguments. In that order, ER Tab 2, the court agreed that if Mr. Mobrez and Ms. Llaneras lied about their conversations with Mr. Magedson, then probable cause did not exist for the RICO/extortion claim: Xcentric has sufficiently alleged that the AEI Plaintiffs initiated their extortion claim by relying on facts they had no reasonable cause to believe to be true. Xcentric provides factual allegations in supports of its claims by alleging that Mobrez and Llanerass declarations about such conversations were directly contradicted by a recording or recordings that are in Xcentric's possession . Taking as true the allegations that the AEI Plaintiffs knew AEI was never extorted by Magedson and that there is audio evidence of the contradiction between what the AEI Plaintiffs initially alleged in the California Complaint and declarations 30

and what was actually said in those conversations, Xcentric has alleged sufficient facts to plausibly claim that the AEI Plaintiffs lacked probable cause to initiate the extortion claim. The extortion claim in California Complaint relies primarily on the existence of those conversations between Magedson and Mobrez. Again, the fact that Mobrez and Llaneras substantially revised their affidavits in a way that casts serious doubt on the existence of those conversations after being confronted with the recording is sufficient evidence to make plausible Xcentric's claim that they lacked probable cause to initiate the extortion claim. Borodkin, --- F.Supp.2d ----, 2013 WL 1149917, *78 (D.Ariz. 2013); ER Tab 2 at ER2930 (emphasis added). This earlier holding directly conflicts with the later summary judgment analysis which reached the opposite conclusion; The AEI Plaintiffs may have made false statementseven liedabout some of the facts. But their case did not depend on those statements. Borodkin, 2013 WL 3034267, *9 (emphasis added). In reality, the March 20, 2013 order did not merely find that Xcentric had properly pleaded malicious prosecution based on the false extortion claim. The court also found that Xcentric offered sufficient evidence to create a triable issue of fact as to that claim. Specifically, in addition to resolving other motions, the March 20, 2013 order also addressed an anti-SLAPP motion filed by the Mobrez Parties pursuant to Cal. Code Civ. P. 425.16. Despite other obvious differences, such motions are largely analogous to a defense motion for

31

summary judgment in which the movant claims the plaintiff has insufficient evidence to support its case; California courts have described plaintiffs burden in responding to an anti-SLAPP motion as being similar to the standard used in determining motions for nonsuit, directed verdict, or summary judgment. Manufactured Home Communities, Inc. v. County of San Diego, 655 F.3d 1171, 1177 (9th Cir. 2011) (quoting Gilbert v. Sykes, 147 Cal.App.4th 13, 2122, 53 Cal.Rptr.3d 752 (Cal.App. 3rd Dist. 2007)). Here, despite noting that the anti-SLAPP motion was untimely, the district court further explained that it would deny the motion on its merits because: Xcentric has stated and substantiated a legally sufficient claim for wrongful initiation of civil proceedings based on the extortion claim. It has therefore carried its burden to show that there is a probability that the plaintiff will prevail on the claim. Borodkin, --- F.Supp.2d ----, 2013 WL 1149917, *4 (D.Ariz. 2013); ER Tab 2 at ER2425 (emphasis added). Thus, the court specifically held that Xcentrics malicious prosecution claim was supported by sufficient evidence to create a triable issue of fact as to whether the extortion claim lacked probable cause. This earlier holding was the law of the case which should have foreclosed the ability of the district court to grant summary judgment in favor of the Mobrez Parties less than 90 days later based on the identical arguments. See U.S. v. Limmi Indian Tribe,

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235 F.3d 443, 452 (9th Cir. 2000) (explaining, Under the [law of the case] doctrine, a court is generally precluded from reconsidering an issue previously decided by the same court in the identical case.) However, even if this was not so, the district court still erred when it chose to disregard the extortion claim that was originally presented and focus, instead, on the new version of that claim as described in the Mobrez Parties corrected affidavits. This modified theory, even if viable, does not excuse Mr. Mobrez and Ms. Llaneras from originally pursing a claim they knew was premised entirely on perjury. As a matter of law, the

existence of other facts that might support a claim or relief does not excuse a party who lies about the facts of their claim as it was originally presented: [A]n unsuccessful plaintiff cannot shield himself from a malicious prosecution action by arguing that even if the only theory advanced in the complaint and at trial was groundless and maliciously asserted, he nonetheless possessed some other undisclosed and unlitigated, but tenable, theory. He must stand or fall on the theory advanced and if that theory is one which he knows, or should know, is groundless and he nevertheless maliciously advances it, he must fall. Franklin Mint, 184 Cal.App.4th at 350 (quoting Williams v. Coombs, 179 Cal.App.3d 626, 644, 224 Cal.Rptr. 865 (Cal.App.3rd Dist. 1986) (disapproved on other grounds by Sheldon Appel, 47 Cal.3d at 883, n.9)). As explained above, what happened here is very clear. The factual basis for Mr. Mobrez and Ms. Llaneras RICO/extortion claim in the original 33

Complaint was extremely vague and lacking in specific factual detail. For that reason, at Xcentrics request the California district court ordered Mr. Mobrez and Ms. Llaneras to file declarations clarifying and explaining the factual basis for their extortion claim. ER Tab 10 at ER347. Although these declarations, ER Tab 10 at ER34955; 35760, do include extremely brief, passing references to various emails, the declarations clearly and unequivocally focus almost entirely on the substance of six telephone conversations in April and May 2009 between Mr. Mobrez and Xcentrics principal, Mr. Magedson. In its malicious

prosecution case, Xcentric alleged, and the district court agreed, that substantial evidence exists showing that Mr. Mobrez and Ms. Llaneras lied about nearly every aspect of these telephone conversations. Despite this, the district court concluded that these lies were not relevant to the issue of probable cause because the court opined that the extortion case did not depend on the lies. Again, this is both wrong as a matter of fact, and it directly conflicts with the courts earlier holding to the contrary. At no time did the Mobrez Parties assert claims limited to nonmonetary declaratory relief challenging CAP and how it functioned, nor were their claims ever factually confined to the handful of emails exchanged between the parties. This is, of course, why Mr. Mobrez and Ms. Llaneras

34

decided to liebecause without their detailed story of being pressured into paying at least five grand during a series of phone calls with Mr. Magedson, their extortion claim would have lacked any factual basis at all. This point is confirmed by the fact that after the Mobrez Parties changed their story and filed corrected declarations, the California district court granted summary judgment in Xcentrics favor as to the RICO/extortion claim due to a complete lack of evidence of extortion: [T]here is no evidence that [Xcentric] ever threatened to impute to Plaintiffs any disgrace or to expose a secret affecting Plaintiffs . Plaintiffs have not presented any evidence that Defendants wrote any of the negative comments or reports about Plaintiffs or that Defendants contributed in any substantive way to the negative content of those reports. Similarly, Plaintiffs have not presented any evidence that Defendants instructed or encouraged anyone to write negative reports about Plaintiffs. Finally, there is no evidence that Defendants ever threatened that they would write or post more negative information about Plaintiffs if Plaintiffs did not join the CAP program. Nothing even coming close to such a threat appears in any of the emails to Plaintiffs. Asia Economic Institute, 2010 WL 4977054, *17 (C.D.Cal. 2010). This holding confirms two basic points: 1.) that the false statements about the telephone conversations were an essential part of the extortion claim (until the lies were exposed); and 2.) without the alleged threats made on the phone, there was no evidence whatsoever of extortion and thus no probable cause for that claim. For both reasons, the Mobrez Parties lacked

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probable cause for their RICO/extortion claim; In a situation of complete absence of supporting evidence, it cannot be adjudged reasonable to prosecute a claim. Daniels v. Robbins, 182 Cal.App.4th 204, 222, 105 Cal.Rptr.3d 683, 698 (Cal.App. 4th Dist. 2010). 2. The May 5, 2009 Email Did Not Provide Probable Cause To Sue For RICO/Extortion

Assuming arguendo the court was correct and that these lies may be overlooked because: The AEI Plaintiffs relied on other statementsin phone calls or emails directing the AEI Plaintiffs to the CAP websiteas evidence of predicate acts of extortion, 2013 WL 3034267, *9; ER Tab 1 at ER 15, the district court still erred in holding that these other statements, including Mr. Magedsons May 5th email, ER Tab 17 at ER538544, were sufficient to establish probable cause to sue Xcentric for RICO/extortion. The reason, as the California district court already determined, is that none of the other statements allegedly cited by the Mobrez Parties came even close to showing a single act of extortion, much less a pattern of extortion which resulted in a loss of money or property by the Mobrez Parties. This point is emphasized by the Arizona courts suggestion that the Mobrez Parties extortion theory was supported by a single case entitled Hy Cite Corp v. Badbusinessbureau.com, L.L.C., 418 F.Supp.2d 1142 (D.Ariz.

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2005). The Hy Cite case involved allegations that Defendants [including Xcentric] create and solicit false and defamatory complaints against businesses, but will cease this conduct for a $50,000 fee and $1,500 monthly retainer. Hy Cite, 418 F.Supp.2d at 1150. Based on those allegations, the district court denied Xcentrics 12(b)(6) motion to dismiss, because assuming the unproven allegations were true, Plaintiff has properly alleged threatened extortion. Id. According to the court below, Hy Cite provided probable cause for the Mobrez Parties to sue Xcentric for RICO/extortion, but that holding was plainly erroneous. This is so because the key fact in Hy Cite was the allegation that Xcentric itself created the false and defamatory complaints about the plaintiff and then proposed to cease that conduct for a fee. Neither of these facts was present here. At no time did Mr. Mobrez or Ms. Llaneras ever offer any evidence whatsoever showing that Xcentric engaged in the same conduct towards them, as the California district court already determined. See 2010 WL 4977054, *17 (finding no evidence that Xcentric created or solicited false reports about Mobrez Parties, or that Xcentric would cease such conduct for a fee). Because the Mobrez Parties had no evidence supporting these

allegations, Hy Cite did not support their RICO/extortion claim.

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This scenario is analogous to the facts in Cole v. Patricia A. Meyer & Assoc., APC, 206 Cal.App.4th 1095, 142 Cal.Rptr.3d 646 (Cal.App. 2nd Dist. 2012). In that case the plaintiff, Mr. Cole, was the founder of a publiclytraded software company called Peregrine Systems. Peregrine filed bankruptcy after it was discovered to have engaged in a large-scale accounting fraud. After the bankruptcy, some of Peregrines former shareholders sued Mr. Cole personally for, inter alia, fraud and deceit by active concealment, fraud and deceit based upon omission and misrepresentations of material facts ... and violation of [Californias] Unfair Competition Law (Bus. & Prof. Code, 17200 et seq.). Cole, 206 Cal.App.4th at 1102. Mr. Cole was, in fact, entirely unaware of the accounting fraud and played no role in it. As a result, summary judgment was granted in his favor. See id. at 1103. After the fraud litigation ended, Mr. Cole sued the former plaintiffs and their attorneys for malicious prosecution claiming the prior lawsuit lacked probable cause because the former plaintiffs had no evidence that Mr. Cole was involved in the fraud. The former plaintiffs counsel responded with an anti-SLAPP motion under Cal. Code Civ. P. 425.16 which the trial court granted in substantial part.

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On appeal, the California Court of Appeal reversed, finding that Mr. Cole showed a likelihood of success on his malicious prosecution claims. Importantly, the defendants in Cole presented a virtually identical argument to the one Mr. Mobrez and Ms. Llaneras make herethey argued they had probable cause to sue Mr. Cole for fraud because he had been sued in an earlier action entitled Peregrine Litigation Trust v. Moores which involved fraud claims that were later settled. This is analogous to Mr. Mobrezs and Ms. Llanerass argument that Hy Cite somehow provided them with probable cause to file their lawsuit. This argument was rejected in Cole; The fact that other attorneys named Cole as a defendant in other causes of action, which were settled before final adjudication, does not demonstrate that the fraud and fraudbased causes of action the Meyer defendants chose to allege against him in Bains were factually or legally tenable. Cole, 206 Cal.App.4th at 1113 (citing Soukup, 39 Cal.4th at 294295) (deeming irrelevant rulings on causes of action in prior suit without collateral estoppel effect on issue of probable cause)). The same rule applies here. The mere fact that the plaintiff in Hy Cite sued Xcentric for attempted extortion based on entirely different and unproven facts does not mean that probable cause existed for Mr. Mobrez and Ms. Llaneras to

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assert such a claim in their case, particularly where they knew their case was a complete sham/fabrication. For that reason, Hy Cite is irrelevant to the question of probable cause. II. THE ORDER DISMISSING XCENTRICS CLAIMS AGAINST MS. BORODKIN AND THE MOBREZ PARTIES UNDER RULE 12(B)/12(C) WAS IMPROPER Xcentric also appeals the November 8, 2012 order, ER Tab 4 (published as Xcentric Ventures, LLC v. Borodkin, 908 F.Supp.2d 1040 (D.Ariz. 2012)) dismissing its claims against Ms. Borodkin pursuant to Fed. R. Civ. P. 12(b)(6), as well as the corresponding March 20, 2013 order, ER Tab 2 (published as Xcentric Ventures, LLC v. Borodkin, --- F.Supp.2d ----, 2013 WL 1149917 (D.Ariz. 2013)) which dismissed, in large part, Xcentrics claims against the Mobrez Parties pursuant to Fed. R. Civ. P. 12(c) for the same reasons. A. Standard Of Review

An order granting a Rule 12(b)(6) motion is reviewed de novo. See Heyer v. Governing Bd. of Mt. Diablo Unified School Dist., 2013 WL 1320499, *1 (9th Cir. 2013) (citing Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1030 (9th Cir. 2008)). The same standard applies to Rule 12(c) motions which are treated as functionally identical to Rule 12(b)(6) motions. U.S. ex rel. v. General Dynamics C4 Systems, Inc., 637

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F.3d 1047, 1055 n.4 (9th Cir. 2011) (quoting Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir.1989)). Because public policy strongly favors the disposition of cases on their merits, a motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted. Gilligan v. Jamco Development Corp., 108 F.3d 246, 249 (9th Cir. 1997). As noted long ago, a court should not grant a motion to dismiss merely if the court believes a plaintiffs claim is legally or factually doubtful, as a case should be tried on the proofs rather than on the pleadings. Rennie & Laughlin, Inc. v. Chrysler Corp., 242 F.2d 208, 213 (9th Cir. 1957). To survive a motion to dismiss, a complaint need not include a microscopic recitation of every fact involved in the case. Rather, a

complaint need only allege basic facts sufficient to raise a right to relief above the speculative level and state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This relatively low standard is established by Fed. R. Civ. P. 8(a) which requires only a short and plain statement of the claim showing that the pleader is entitled to relief. Although claims must be supported by facts sufficient to nudge them across the line from conceivable to plausible[], Twombly, 550 U.S. at 570,

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all reasonable inferences and doubts at this early stage are resolved in favor of the non-moving party. See Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996) (in a 12(b)(6) analysis, [a]ll allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party.)). The traditional rules requiring inferences to be drawn in favor of the plaintiff at the motion to dismiss stage apply in malicious prosecution cases exactly as they do in any other type of case. See Pochoda v. Arpaio, 2009 WL 1407543, *5 (D.Ariz. 2009) (denying Rule 12(b)(6) motion to dismiss in malicious prosecution action based on typical Rule 12 standards) (citing Zimmerman v. City of Oakland, 255 F.3d 734, 737 (9th Cir. 2001)). Finally, although certain claims are subject to a higher pleading standard under Fed. R. Civ. P. 9(b), malicious prosecution claims are not within the scope of that rule. See Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002) (holding claim for malicious criminal prosecution not subject to the heightened pleading requirements of Rule 9(b)). B. Argument 1. Xcentrics Complaint Stated A Claim Against Ms. Borodkin

Turning to the first point for consideration, the question is simple: did Xcentrics last operative pleadingthe first amended complaint (FAC), ER Tab 9contain sufficient facts to state a plausible claim for relief

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against Ms. Borodkin? Answering that question necessarily begins with a review of the three primary elements (in addition to causation/damages) of a claim for malicious prosecution under California law: 1.) The defendant was actively involved in commencing or continuing a civil lawsuit which was terminated in plaintiffs favor; The action lacked probable cause; and The defendant acted with malice.

2.) 3.)

See Crowley, 8 Cal.4th at 676 (listing elements) (citing Bertero, supra). Under the traditional standards of Rule 12, Xcentrics FAC alleged sufficient facts to establish each element of the tort as to Ms. Borodkin. For that reason, the order dismissing Ms. Borodkin was erroneous. 2. Ms. Borodkin Was Actively Involved In Pursuing The Litigation

Here, Ms. Borodkin never disputed the first element of the torti.e., that she was actively involved in continuing to prosecute the prior California lawsuit after appearing on April 19, 2010, see FAC 30, ER Tab 9 at ER279, and that she remained actively involved until the action was terminated in Xcentrics favor with respect to all claims and all relief requested in June 2011. Assuming these allegations were true, the FAC contained sufficient facts to establish the first element of the tort.

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Ms. Borodkin previously argued that contrary to the allegations in Xcentrics complaint, one cause of actionthe RICO/wire fraud claim was not resolved in favor of Xcentric because the claim was voluntarily dismissed. Borodkin, 908 F.Supp.2d at 1047. This argument misstates8 the facts but it is ultimately irrelevant. This is so because as noted supra, a claim for malicious prosecution does not require proof that every cause of action in the underlying action was groundless or that every claim was resolved in favor of the former defendant. Indeed, malicious prosecution may be based on a claim that is voluntarily withdrawn. See Hindin, 118 Cal.App.4th at 1253 (malicious prosecution claim could be properly asserted based on groundless cause of action which was voluntarily withdrawn 45 days after it was asserted). Rather than conducting a piecemeal review of individual claims to ascertain how each was finally disposed, the relevant question is whether the prior action, as a whole, was terminated favorably to the defendant vel non. If so, then it makes no difference that one or more claims were abandoned, withdrawn, stricken, or resolved in some other manner not reflective of their merits. See Sierra Club, 72 Cal.App.4th at 1153, 85

The RICO/wire fraud claim was not voluntarily dismissed by Ms. Borodkin. That claim was stricken by the California district court in an order dated September 20, 2010. ER TAB 8 at ER 259. 44

Cal.Rptr.2d at 737 (noting, a malicious prosecution plaintiff is not precluded from establishing favorable termination where severable claims are adjudicated in his or her favor.) (citing Singleton v. Perry, 45 Cal.2d 489, 497498, 289 P.2d 794 (1955); Paramount General Hospital Co. v. Jay, 213 Cal.App.3d 360, 369370, 261 Cal.Rptr. 723 (Cal. 1989)). Xcentrics FAC alleged that the Asia litigation was terminated in its favor by virtue of an order granting summary judgment. FAC 65, 66, ER Tab 9 at ER28687. An order granting summary judgment in favor of a defendant based on a lack of evidence supporting plaintiffs case is a favorable termination as a matter of law. See Sierra Club, 72 Cal.App.4th at 114950. Because the complaint alleged that Ms. Borodkin was actively involved in pursuing the prior case and that the action was terminated in favor of Xcentric, it contained sufficient facts to establish the first element of the tort. 3. Xcentrics Complaint Properly Alleged Malice

Taking the elements out of order, it is clear that the third element of the tortmalicewas properly alleged in the FAC. The Arizona district court already made an express finding to that effect. See 2012 WL 2919539, *4; ER Tab 6 at ER8081. Based on this, there are no grounds to dispute that Xcentrics complaint failed to sufficiently allege malice.

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4.

Xcentric Properly Alleged Lack Of Probable Cause

The final element of a malicious prosecution claim is proof that a defendant acted without probable cause, either in the commencement or continuation of the prior litigation. Although this Courts standard of review is de novo, the Arizona district courts dismissal of Xcentrics claims against Ms. Borodkin was based solely on its belief that the FAC did not allege sufficient facts to show that Ms. Borodkin pursued the California action knowing that it lacked probable cause. This error was primarily due to the courts overly narrow view of the law, coupled with its misunderstanding or misinterpretation of the allegations in Xcentrics complaint. As discussed above, it is never necessary for a malicious prosecution plaintiff to show that every claim in the prior action lacked probable cause; a single groundless claim is sufficient. Further, probable cause always

requires a conjunction of two things: 1.) a reasonable belief in the facts alleged; and 2.) a tenable legal theory that would permit recovery based on those facts. Probable cause cannot exist without both; 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. Sangster, 68 Cal.App.4th at 164165; see also Cole, 206 Cal.App.4th at 1106 (explaining

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malicious prosecution requires only that any one of the theories was legally untenable or based on facts not reasonably believed to be true.) This point is crucial because in the prior California action, Ms. Borodkin asserted and pursued a dozen separate causes of action against Xcentric including the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. RICO/extortion RICO/wire fraud; RICO conspiracy; Unfair Business Practices; Cal. Bus. & Prof. Code 17200; Defamation; Defamation Per Se; Intentional Interference With Prospective Economic Advantage; Negligent Interference With Prospective Economic Advantage; Negligent Interference With Economic Relations; Deceit; Fraud; and Injunction

These claims were set forth in two separate pleadingsthe Asia Plaintiffs initial complaint, ER Tab 10 at ER313345, and first amended complaint, ER Tab 8 at ER169252. Together, these two complaints

cumulatively exceeded 120 pages of pleadings with nearly 500 paragraphs of factual allegations and more than 300 pages of exhibits. Given the large number of causes of action (12) and vast amount of factual allegations (nearly 500 paragraphs spanning 120+ pages of pleadings), Xcentrics original complaint did not attempt the Herculean task 47

of identifying each and every fact, detail, and discrete item of evidence showing that probable cause was lacking as to each every claim and theory asserted in the Asia litigation. Instead, Xcentric employed a more practical approach squarely within the liberal pleading standards of Rule 8. First, Xcentric generally alleged that Ms. Borodkin knew that the entire Asia litigation was entirely groundless and frivolous and that she proceeded to actively pursue the case despite that knowledge. See FAC 57, ER Tab 9 at ER 27475. If this bare allegation was the beginning and end of the complaint, it perhaps might qualify as the sort of unadorned, thedefendant-unlawfully-harmed-me accusation prohibited by Iqbal.

However, Xcentrics complaint did not stop with only a bare, unadorned allegation. Instead, the complaint presented at least two separate reasons why Ms. Borodkin knew or should have known that certain claims in the case lacked probable cause. First, regarding the RICO/extortion claim, in a nutshell the FAC asserted that this claim lacked probable cause for one simple reason because the claim was entirely fabricated and false. See FAC 41, 42, ER Tab 9 at ER 28182. This fact was established both by the recorded

telephone calls between the parties which clearly showed that the alleged extortion never occurred, and it was also independently established by the

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corrected declarations filed by Mr. Mobrez and Ms. Llaneras wherein they completely withdrew their previous allegations. After these events occurred, there was simply no factual basis of any kind that would support an allegation that Xcentric was liable for RICO/extortion. Despite this, Ms. Borodkin refused to withdraw the extortion claim and continued pursuing it until summary judgment was entered in favor of Xcentric. See FAC 47, 51, 52, 57, ER Tab 9 at ER 28285. In the proceedings below, the district court avoided this issue by incorrectly concluding that Ms. Borodkin was unaware that her clients lied because: [T]he only basis supplied by Xcentric in its FAC for Borodkins knowledge of the falsity is that Xcentrics counsel subsequently told Mobrez and Llaneras about the tape (without giving it to them) and sent a letter to Blackert and Borodkin that accused their clients of lying. But a letter from a litigation adversary merely suggesting it disagrees with the verity of the allegations in the lawsuit is not sufficient to put the lawyer on notice of the falsity of the clients allegations.

2012 WL 546500, *6; ER Tab 4 at ER 6364 (internal quotation marks omitted) (quoting Daniel v. Robbins, 182 Cal.App.4th 204, 105 Cal.Rptr.3d 683, 698 (Cal.App.4th Dist. 2010)). However, Ms. Borodkin did receive a copy of the recorded calls, as did her clients. Of course, in a 12(b)(6) context Xcentric was prohibited

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from offering evidence outside the pleadings, and because Xcentric had no way of knowing that the district court would reach this erroneous conclusion, Xcentrics complaint was silent on this point. For that reason, Xcentric could not inform the district court that, in fact, Ms. Borodkin was provided a copy of the recorded phone callsboth by a copy of the recordings being appended as an exhibit to her clients deposition, and also by virtue of a copy being emailed to her later that same day. These points were, however, clearly set forth in paragraph 47 of Xcentrics proposed second amended complaint, ER Tab 8 at ER115, which the district court refused to permit Xcentric to file. Additionally, the district court incorrectly held that the sole basis for claiming that Ms. Borodkin knew about her clients lies was because Xcentrics counsel told her so. Again, this conclusion was simply wrong because it ignored the fact that Ms. Borodkins own clients each admitted that their original stories were not true. See ER Tab 10 at ER376

(Corrected Affidavit of Raymond Mobrez) at 2 (explaining, I have since learned that at the time I filed my May 3, 2010 Declaration, I was mistaken as to the substance of the six phone conversations between myself and Mr. Magedson .); ER Tab 10 at ER384. (Corrected Affidavit of Iliana Llaneras) at 3 (explaining, After reviewing [the phone call

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recordings], I now believe that the descriptions of the telephone conversations in my May 3, 2010 declaration were not accurate.) In light of these facts, although the Arizona district court correctly observed that In general, a lawyer is entitled to rely on information provided by the client[] 2012 WL 5465000, *6; ER Tab 4 at ER63 (quoting Daniel, supra) the court then mentioned but failed to apply the corollary to that rule; [i]f the lawyer discovers the clients statements are false, the lawyer cannot rely on such statements in prosecuting an action. Id. This is exactly what Xcentric alleged herethat by virtue of her clients own statements in their corrected declarations, coupled with the recordings of the phone calls between Mr. Mobrez and Mr. Magedson, Ms. Borodkin knew or should have known that the RICO/extortion claim as actually pleaded was factually groundless, yet she refused to withdraw the claim. These facts are per se sufficient to establish that Ms. Borodkin acted without probable cause by continuing to pursue the RICO/extortion claim after discovering the claim was factually groundless because her clients were not extorted. See Sycamore Ridge, 157 Cal.App.4th at 140306 (finding lawyer lacked probable cause to pursue claims for damages after clients own discovery responses revealed that client was not injured); see also Zamos, 32 Cal.4th at 96162 (holding when lawyer received transcript of

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clients own testimony showing claims at issue were groundless but lawyer refused to dismiss case, lawyer acted without probable cause by continuing to pursue case). On this basis alone, the district courts order dismissing Xcentrics malicious prosecution claim against Ms. Borodkin was erroneous and must be reversed. Second, entirely separate and apart from this issue, the FAC also alleged that the RICO/extortion claim lacked probable cause for a different reasonbecause the Asia plaintiffs entity, Asia Economic Institute, LLC (AEI), was a non-operational sham that had $0 in revenues and $0 in profits during its nine years in operation. See FAC 51, ER Tab 9 at ER283. Once again, this fact was established by the uncontroverted

deposition testimony of Ms. Borodkins client, Mr. Mobrez, who stated that he never attempted to conduct any business through AEI either before the alleged extortion or afterwards. This single point was completely

dispositive as to the existence of probable cause because many of the claims asserted by Ms. Borodkin, including the federal racketeering claims and unfair competition claims under Cal. Bus. & Prof. Code 17200, required proof of actual economic loss to the plaintiffs business. See Firemans Fund, 258 F.3d at 1021 (explaining, to satisfy the damages requirement of a civil RICO claim, a plaintiff must show that the defendant caused

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injury to his business or property.); see also Birdsong v. Apple, Inc., 590 F.3d 955, 959 (9th Cir. 2009) (holding, To have standing under Californias UCL, as amended by Californias Proposition 64, plaintiffs must establish that they (1) suffered an injury in fact and (2) lost money or property as a result of the unfair competition.) (emphasis added). Again, based solely on her clients own testimony, Ms. Borodkin knew that the federal racketeering claims and California unfair competition claims lacked probable cause for the same reason as in cases like Sycamore Ridgebecause her clients own testimony showed that no actionable damage occurred. Since actual economic loss was a mandatory element of both the RICO and California UCL claims, Ms. Borodkin had no reasonable basis to continuing pursing such claims after her own clients testimony revealed the claims were groundless. Even if Ms. Borodkin could somehow profess ignorance of this point (despite being present during this portion of Mr. Mobrezs deposition), this would not relieve her of liability. This is so because California law imposes liability upon lawyers who appear in litigation without first personally confirming that each claim is supported by probable cause. See Cole, 206 Cal.App.4th at 111620, 142 Cal.Rptr.3d at 663666 (holding a lawyer may be liable for malicious prosecution solely by virtue of associating into a case

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being pursued maliciously; a lawyer cannot avoid liability for malicious prosecution by claiming ignorance of the truth because lawyer has affirmative duty to verify that probable cause exists for every claim at issue, and explaining, Sycamore Ridge provides authority for holding an attorney liable for the very act of associating into a case containing frivolous claims.) (citing Sycamore Ridge, supra, 157 Cal.App.4th at 1396). Despite these arguments and without citing any authority for its conclusion, the Arizona district court summarily rejected this aspect of the case, holding, the absence of revenue or profit does not preclude the existence of economic damages. Therefore, Xcentrics allegation regarding damages does not support a claim that the California Action lacked probable cause. 2012 WL 546500, *7; ER Tab 4 at ER64. The courts conclusion disregarded the deferential context of a Rule 12 motion in which all inferences must be drawn in Xcentrics favor. Viewing the complete lack of revenue and business operations in a light most favorable to Xcentric, it is certainly plausible that Mr. Mobrez knew no economic loss occurred because he never attempted to engage in any business whatsoever either before the events at issue or after. In that case, probable cause did not exist for the Mobrez Parties to assert any claims which required proof of actual damages. See, e.g., Sycamore Ridge, 157

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Cal.App.4th at 140506 (agreeing attorneys lacked probable cause to pursue numerous claims for damages, including claims for unfair business practices under Cal. Bus. & Prof. Code 17200, where client admitted she had not suffered any actual loss). The mere hypothetical possibility that a different case might exist under different facts in which economic losses were successfully proven by a company with $0 revenues during nine years of operations does not mean that such was the case here. Thus, Xcentric properly alleged that the Mobrez Parties lacked probable cause to assert any claims which contained a mandatory element of actual economic loss including both RICO claims as well as the California unfair business practice claim. By extension, this means Ms. Borodkin (who knew AEI had $0 revenue) did not have probable cause to pursue any of those claims. For these reasons, the district courts order, ER Tab 4,

granting Ms. Borodkins motion to dismiss should be reversed. In addition, the order granting the Mobrez Parties Rule 12(c) motion based on exactly the same reasoning, that order, ER Tab 2, should also be reversed. III. THE COURT ABUSED ITS DISCRETION BY DENYING LEAVE TO AMEND AND MODIFICATION OF THE CASE MANAGEMENT ORDER Even assuming that Xcentrics FAC lacked sufficient facts to state a claim as to either Ms. Borodkin or the Mobrez Parties, this should not have

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been fatal to the case. On the contrary, as the U.S. Supreme Court has consistently noted, The Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits. Foman v. Davis, 371 U.S. 178, 18182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). In keeping with that admonition and Rule 15s policy of liberal amendments, the district court should have allowed Xcentric to amend. Its refusal to do so was a clear abuse of discretion. A. Standard Of Review

Denial of leave to amend is reviewed for abuse of discretion. See Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1072 (9th Cir. 2008). Further, [a] court abuses its discretion when it fails to apply the correct legal standard or bases its decision on unreasonable findings of fact. Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012) (quoting Nachshin v. AOL, LLC, 663 F.3d 1034, 1038 (9th Cir. 2011)). Given Rule 15s strong policy favoring liberal amendments, Dismissal without leave to amend is improper unless it is clear, upon de novo review, that the complaint could not be saved by any amendment. Polich v. Burlington N., Inc., 942 F.2d 1467, 1472 (9th Cir. 1991). Likewise,

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leave to amend should be granted unless the district court determines that the pleading could not possibly be cured by the allegation of other facts. United States v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001). In assessing the propriety of amendment, the court should also consider the following factors: (1) bad faith, (2) undue delay, (3) prejudice to the opposing party and the futility of amendment. See United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1527 (9th Cir. 1995); Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 339 (9th Cir.1996). This Court has further instructed this determination should generally be performed with all inferences in favor of granting the motion. Griggs v. Pace Amer. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999); see also Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (noting Rule 15(a) should be applied with extreme liberality.) Here, after the court granted Ms. Borodkins 12(b)(6) motion, Xcentric moved for leave to amend. ER Tab 21. In conjunction with that request, Xcentric submitted a heavily-revised proposed second amended complaint setting forth its claims in much greater detail. ER Tab 8. Eight days later on December 18, 2012, the district denied leave to amend. ER Tab 3. The sole basis for the denial was that a pre-existing

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amendment deadline set by case management order, ER Tab 22, had passed. In that same order, the court noted; Plaintiff must move to continue the deadlines and must establish good cause for the Court to do so. ER Tab 3 at ER52. Later that same day, on December 18, 2012 Xcentric filed a motion seeking to modify the CMOs deadlines and renewing its request for leave to amend. ER Tab 20. Once again, on March 20, 2013 the court denied leave to amend, this time explaining: Xcentric moves the Court to amend the CMO now to permit amendment and advances a number of arguments about how it is not at fault in the protraction of this litigation. The Court recognizes that some events were out of Xcentrics hands. Nevertheless, the Court adheres to the CMO unless good cause can be shown, and Xcentric has not shown good cause. It appears the main purpose of its Motion is to try and add detail to its FAC that was previously lacking, after it has already had at least one previous chance to do so. That does not constitute good cause. Xcentrics Motions to Amend are denied. ER Tab 2 at ER39 (emphasis added). B. Argument

Under the facts of this case, the denial of leave to amend and the associated denial of Xcentrics request to extend the CMOs amendment deadlines were clear abuses of discretion. First and foremost, the district courts assertion that leave to amend should be denied because the main purpose of its Motion is to try and add detail to its FAC that was previously 58

lacking, after it has already had at least one previous chance to do so was plainly unreasonable if not wholly groundless. The only pleading amendment that occurred in this case involved Xcentrics FAC filed on March 16, 2012. That amendment did not occur in response to any 12(b)(6) motion filed by any defendant. At that time, no 12(b)(6) motions had been filed by any defendant. Rather, the amendment occurred because on March 1, 2012 the district court issued an order, ER Tab 7, granting an extremely narrow part of Ms. Borodkins earlier Rule 12(e) motion for more definite statement. In that Rule 12(e) motion, Ms. Borodkin never claimed the original complaint lacked sufficient detail as to why the prior action lacked probable cause. Rather, her arguments were largely focused on the question of malice. The court denied the bulk of Ms. Borodkins arguments, but it agreed that a small aspect of Ms. Borodkins Rule 12(e) motion had merit. As such, the court ordered Xcentric to amend its complaint to clarify the facts concerning Ms. Borodkins malice. ER Tab 7 at ER102. After Xcentric amended its complaint as ordered, Ms. Borodkin filed a second Rule 12(e) motion arguing, once again, that malice was still not sufficiently pleaded. As before, Ms. Borodkins second Rule 12(e) motion

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did not argue that the FAC lacked sufficient detail as to why the prior action lacked probable cause. Ms. Borodkins second Rule 12(e) motion was denied in its entirety on July 17, 2012. ER Tab 6. At that point, Xcentric had no reason to amend its FAC to include more detail on the issue of probable cause because no defendant had filed any motion presenting such an argument. Thus,

Xcentric had no reason to amend its complaint a second time when the CMOs amendment deadline passed a few days later on July 23, 2012. It was not until after the amendment deadline passed that Ms. Borodkin filed her 12(b)(6) motion arguing, for the first time, that the FAC failed to contain sufficient detail showing why the prior action lacked probable cause. Of course, by the time that motion was filed on July 31, 2012, Xcentric could not have amended to address Ms. Borodkins arguments because the July 23, 2012 amendment deadline had already passed. Moreover, there was still no reason for Xcentric to amend until the court granted Ms. Borodkins 12(b)(6) motion several months later on November 8, 2012. Obviously, until Xcentric had a chance to review the courts reasoning, any amendment would have been premature. For that reason, the court clearly abused its discretion when it denied leave to amend based on the fact that Xcentric had amended its complaint

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once before. The prior amendment had nothing to do with the arguments raised in Ms. Borodkins later-filed 12(b)(6) motion and thus Xcentric was denied any opportunity whatsoever to address or cure those issues. For that reason, the prior amendment was irrelevant. See Karnercom Too v. Ibar Development, LLC, 464 Fed.Appx. 588, 591, 2011 WL 6778621, *2 (9th Cir. 2011) (holding that when an amended pleading has not been previously dismissed, amendments occurring before the dismissal are irrelevant to the question of whether leave to amend may be denied on the basis of prior amendments). Because no valid reason existed for the courts decision, the denial of leave to amend was an abuse of discretion. See Lyons v. Skolnik, 2013 WL 29395, *1 (9th Cir. 2013) (finding abuse of discretion and reversing dismissal where court denied leave to amend solely based on expiration of amendment deadline set in prior order and there was no indication of undue delay, bad faith, or dilatory motive on [plaintiffs] part, or that defendants, who had not yet filed a response to the complaint, would suffer undue prejudice through the filing of an amended complaint.); Smith v. Pacific Prop. & Dev. Corp., 358 F.3d 1097, 1106 n. 10 (9th Cir. 2004) (finding, A simple denial of leave to amend without any explanation by the district court is subject to reversal. Such a judgment is not an exercise of discretion; it is merely an

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abuse [] of discretion... .) (quoting Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003)). In addition, the district court denied leave to amend without finding that amendment would be futile and without weighing or even considering any of the other factors. Again, this was an abuse of discretion. U.S. v. Corinthian Colleges, 655 F.3d 984, 99596 (9th Cir. 2011) (district court abused its discretion by granting motion to dismiss without leave to amend and without making express finding that amendment would be futile); see also Maxwell v. Lucky Const. Co., 710 F.2d 1395, 1399 (9th Cir. 1983) (Failure to consider pertinent factors constitutes an abuse of discretion.) For the same reasons, the district courts refusal to modify the CMOs amendment deadline was improper. As explained in Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992), a party seeking to amend pleading after date specified in scheduling order must first show good cause for amendment under Rule 16(b), then, if good cause be shown, the party must demonstrate that amendment was proper under Rule 15.) Although the good cause inquiry involves several factors, this Court has consistent held that good cause exists to modify a pretrial schedule if it cannot reasonably be met despite the diligence of the party seeking the extension. Johnson, 975 F.2d at 609 (quoting Fed. R. Civ. P. 16(b) and

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citing extensive authority); see also Regional Care Services v. Companion Life Ins. Co., 2012 WL 1018937, *4 (D.Ariz. 2012) (noting, For purposes of Federal Rule of Civil Procedure 16(b)(4), good cause means the scheduling deadlines cannot be met despite the [requesting] partys diligence.) Here, under no circumstances could Xcentric have amended its complaint to address the issues raised in Ms. Borodkins July 31, 2012 motion to dismiss because that motion was filed after the June 23, 2012 amendment deadline had already passed. Of course, given that Ms.

Borodkin had previously filed numerous other pre-answer motions, virtually all of which were denied, no valid reason existed for Xcentric to amend its complaint until after the court granted Ms. Borodkins 12(b)(6) motion several months later in November. In light of these facts, good cause existed to extend the CMOs amendment deadline, and the district court abused its discretion when it denied that request. IV. CONCLUSION For the foregoing reasons, Xcentric respectfully requests that this Court reverse the district courts order granting summary judgment in favor of the Mobrez Parties. In addition, Xcentric respectfully requests that this

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Court reverse the district courts orders granting Ms. Borodkins and the Mobrez Parties motions to dismiss, and the order denying leave to amend. The Court should further remand this matter with instructions that Xcentrics request for leave to amend should be granted.

Date: September 26, 2013

s/ David S. Gingras David S. Gingras, Esq. Gingras Law Office, PLLC 4802 E. Ray Road, #23-271 Phoenix, AZ 85044 Telephone: (480) 264-1400 Facsimile: (480) 248-3196 Email: David@GingrasLaw.com Attorney for Appellant XCENTRIC VENTURES, LLC

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CERTIFICATE OF COMPLIANCE

1.

This brief complies with the type-volume limitations of Fed. R.

App. P. 32(a)(7)(B) because the brief contains 13,986 words, excluding the parts exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of Fed. R.

App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because the brief has been prepared in a proportionally spaced typeface using Microsoft Word in fourteen-point Times New Roman font.

Date: September 26, 2013

s/ David S. Gingras David S. Gingras, Esq. Gingras Law Office, PLLC 4802 E. Ray Road, #23-271 Phoenix, AZ 85044 Telephone: (480) 264-1400 Facsimile: (480) 248-3196 Email: David@GingrasLaw.com Attorney for Appellant XCENTRIC VENTURES, LLC

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STATEMENT OF RELATED CASES

In accordance with Ninth Circuit Local Rule 28-2.6, Appellant hereby states that there are no other cases related to this consolidated appeal.

Date: September 26, 2013

s/ David S. Gingras David S. Gingras, Esq. Gingras Law Office, PLLC 4802 E. Ray Road, #23-271 Phoenix, AZ 85044 Telephone: (480) 264-1400 Facsimile: (480) 248-3196 Email: David@GingrasLaw.com Attorney for Appellant XCENTRIC VENTURES, LLC

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CERTIFICATE OF SERVICE U.S. Court of Appeals Docket Number: 13-15544; 13-16271 (Consolidated) I hereby certify that I filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by U.S. Mail on October 1, 2013.

s/David S. Gingras

CERTIFICATE OF BRIEF IN PAPER FORMAT U.S. Court of Appeals Docket Number: 13-15544; 13-16271 (Consolidated)

I, David S. Gingras, certify that this brief is identical to the version submitted electronically on September 26, 2013.

Date: October 1, 2013

s/ David S. Gingras David S. Gingras, Esq. Gingras Law Office, PLLC 4802 E. Ray Road, #23-271 Phoenix, AZ 85044 Telephone: (480) 264-1400 Facsimile: (480) 248-3196 Email: David@GingrasLaw.com Attorney for Appellant XCENTRIC VENTURES, LLC