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UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

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THE HONORABLE STEPHEN V. WILSON, U.S. DISTRICT JUDGE PRESIDING

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ASIA ECONOMIC INSTITUTE, LLC,

et al.,

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Plaintiffs,
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vs.
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XCENTRIC VENTURES, LLC, et al. )
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Defendants.
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_______________________________)

No.

CV 10-1360-SVW

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REPORTER'S TRANSCRIPT OF PROCEEDINGS

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LOS ANGELES, CALIFORNIA

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MONDAY, JULY 12, 2010

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_____________________________________________________________
DEBORAH K. GACKLE, CSR, RPR
United States Courthouse
312 North Spring Street, Room 402A
Los Angeles, California 90012
(213) 620-1149

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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APPEARANCES OF COUNSEL:

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For the Plaintiff:

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ASIA ECONOMIC INSTITUTE

BY: LISA J. BORODKIN
BY: DANIEL F. BLACKERT
11766 Wilshire Boulevard, Suite 260
Los Angeles, California 90025

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For the Defendants:

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LAW OFFICES OF DAVID S. GINGRAS

BY: DAVID S. GINGRAS
4072 E. Mountain Vista Drive
Phoenix, Arizona 85048

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JABURG & WILK

BY: MARIA CRIMI SPETH
3200 North Central Avenue, Suite 2000
Phoenix, Arizona 85012
602-248-1000
Fax: 602-248-0522
Email: mcs@jaburgwilk.com

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UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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LOS ANGELES, CALIFORNIA; MONDAY, APRIL 19, 2010; 2:15 P.M.

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THE CLERK:

Item 11, CV 10-1360-SVW, Asia Economic

Institute, et al. versus Xcentric Ventures, LLC, et al.

Counsel, please state your appearances.

MS. BORODKIN:

Lisa

Borodkin for the plaintiffs.

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Good afternoon, Your Honor.

MR. BLACKERT:

Good afternoon, Your Honor.

Daniel

Blackert for the plaintiffs.

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MR. GINGRAS:

Good afternoon, Your Honor.

David

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Gingras on behalf of defendants Xcentric Ventures, LLC, and Ed

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Magedson.

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MS. SPETH:

Good afternoon, Your Honor.

Maria Speth

on behalf of the defendants, as well.

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THE COURT:

Let me ask first the plaintiff:

The two

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predicate acts that are in the complaint -- extortion and mail

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fraud -- the focus of this motion has been the extortion

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predicate act.

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been hardly referenced and certainly not described in any

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detail at all.

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The mail fraud -- strike that -- wire fraud has

Are you pursuing the wire fraud as a predicate act

also?
MS. BORODKIN:

Your Honor, we are, and that was one

of the things we were hoping to request from you today due to

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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recently discovered evidence, yes.

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THE COURT:

Answer my question.

The answer is yes,

correct?

MS. BORODKIN:

THE COURT:

Correct.

And so can you give me a description of

what the wire fraud allegation is, because obviously the

complaint, if there had been a 9B --

(Interruption in the proceedings.)

THE COURT:

Now, if there had been a Rule 9B motion

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filed in this case, the Rule 9B motion would undoubtedly have

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been granted because wire fraud is the type of allegation that

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falls within Rule 9B, and there is no description.

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Can you tell me, at least orally, how you would deal

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with that if you were allowed to replead it, and I'll have to

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give you that opportunity, but I'm interested in your overview

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now.

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Tell me how you would replead, if given the opportunity.

MS. BORODKIN:

Your Honor, we would replead it by

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stating with particularity specific times, places and speakers

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and recipients of representations to people that Ripoff reports

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are never taken down, that the statement was false, it was made

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with the intent to defraud the recipients of the statements

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into pursuing applications into the corporate advocacy program.

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THE COURT:

Even if that were pled, how would that

constitute a fraud on the plaintiff?

MS. BORODKIN:

Because it's false that reports are

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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never taken down, and --

THE COURT:

Let's say there was a false statement.

There has to be causation, injury and so forth.

How would that

all develop under your theory?

the more likely type of allegation would be that these reports

are taken down and then they weren't.

look, I joined the corporate program or I paid the fee or

whatever because of the representation that these defamatory

allegations would be removed.

In other words, it seems that

Someone would say, Well,

Now you're saying -- you're not

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saying that, you're saying that the fraud was -- that defendant

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said they would be never taken down.

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Where is the injury?

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MS. BORODKIN:

Your Honor, I apologize.

This is all

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very recent that we discovered contradictory evidence in the

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record.

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reports may have declined to pursue certain avenues of relief

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that may been available to them had they known the true facts

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which are there are limited circumstances in which reports may

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be taken down, but they simply don't get that far because their

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representations on the websites and the correspondence.

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Defendants stated copiously there is only one way to address

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these reports.

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Generally, the injury is that subjects of the Ripoff

THE COURT:

You're saying that the defendant says

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these allegedly defamatory comments by third parties will never

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be removed, and you're saying that that is false because there

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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is an instance that you allege in which arguably it was

removed.

So if you establish that that statement is false, how

does that constitute wire fraud as to your client?

words, what would your client have done differently had that

reputation been set forth truthfully?

MS. BORODKIN:

Your Honor, we appreciate what the

court's trying to do and narrow this.

whole host of --

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THE COURT:

In other

The truth is there are a

Ma'am, here's what you have to do, and I

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say that kindly, no indictment of you intended:

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here between you and the defendant, you've created a horrible

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record to the point that the magistrate has been so upset that

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he called both of you uncivil and he's considering sanctions

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against both of you, and that can't persist.

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some of the problem is because you're not listening to my

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question.

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listen to my question.

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you can scream at each other as you have.

You want to get your point across.

Along the way

I can see where

You have to

This is not a deposition office where

You have to focus.

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The question again is if the defendant had, in your

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view, said the truth that these defamatory statements will be

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taken down as opposed to never been taken down, how would that

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have defrauded your client?

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MS. BORODKIN:

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THE COURT:

I'm sorry --

For argument's sake, I'm acknowledging or

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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accepting for the moment that the statement wasn't true.

other words, I'm agreeing with you, just for argument's sake.

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How would that lead to a wire fraud against your

client?

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In

What would your client have done differently?

MS. BORODKIN:

Your Honor, perhaps I'd have to ask my

client.
THE COURT:

See, that's the problem, ma'am.

This is,

in my view, pretty -- I'm looking for a word that is not

pejorative that still makes the point -- pretty unacceptable

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lawyering because under Rule 11 you've now admitted to a

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Rule 11 violation.

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predicate act for your RICO.

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can't even, in a best-world sense, articulate a wire fraud.

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You now say you have to speak to your client.

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clearly say that you have to have a good-faith basis for

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alleging something in a complaint, and how could you have had a

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good-faith basis without speaking to your client and now being

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totally unable to articulate a basis?

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You filed a wire fraud allegation as a

MS. BORODKIN:

As you stand at the lectern, you

The rules

Your Honor, with all do respect, I was

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not counsel of record when the complaint was filed.

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like to inquire as to the attorney who did prepare and file

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those papers?

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THE COURT:

May be.

Would you

I mean it may very well be that

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that person is the person that has to be called to answer.

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the other hand, I'm not so sure that the reach of Rule 11

On

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COURT REPORTER DEBORAH K. GACKLE

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doesn't extend to someone who takes over a case, especially

when the case has reached motion practice, but I'll leave that

aside for the moment.

Okay.

Let's leave that aside for the moment.

Now, I just want to review with you certain

matters.

The magistrate judge gave you an hour and a half of

additional time to take the deposition of defendant Magedson.

MR. GINGRAS:

THE COURT:

Magedson.

Magedson.

And forgetting for the moment

that there's been some inability -- for lack of a better

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word -- for the parties to find a time and place, one of the

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matters that you want to -- the three matters that I can see

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that you want to inquire further of Magedson are the number of

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persons enrolled in the category program, correct?

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of them?

Is that one

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MS. BORODKIN:

Correct, Your Honor.

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THE COURT:

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Then you want information about Magedson's cell phone

One of the three.

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and whether he uses his cell phone to conduct business.

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the second matter.

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MS. BORODKIN:

That's

Your Honor, to be more specific, we

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would like to continue the line of questioning that was

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commenced when we started to discuss the cell phones.

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state that he uses his cell phone for business.

He did

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THE COURT:

I see.

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And then you want to question him about whether any

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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positive material is ever posted on the Ripoff Report website,

correct?

MS. BORODKIN:

Again, to be perfectly clear, he did

testify that positive reports are permitted to be posted.

wanted to inquire further as to the nature of those reports, if

there was anything other than a rebuttal.

THE COURT:

I see.

Those are the three matters that

you want to inquire further of in the hour-and-a-half

deposition.

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MS. BORODKIN:

We

There are those and also, in

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particular, we wanted to understand further steps such as the

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second questionnaire that Mr. Magedson testified to and the cap

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agreement that he testified to.

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THE COURT:

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the matters.

I see.

With regard to this -- those are

Thank you for summarizing them.

Now, with regard to this questionnaire, aside from

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the deposition, the plaintiff also wants to see that

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questionnaire.

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never seen the questionnaire.

You've described the questionnaire, but I've

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Do you have the questionnaire with you?

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MR. GINGRAS:

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THE COURT:

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I do not, Your Honor.

Well, why haven't you shown it to the

plaintiff?

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MR. GINGRAS:

Well, we'd be happy to, Your Honor, if

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it was relevant to any of the --

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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THE COURT:

I didn't ask you.

I want you to -- now,

the questionnaire, was the questionnaire given to the

plaintiff?

MR. GINGRAS:

THE COURT:

Was the questionnaire given to the

plaintiff?

MS. BORODKIN:

THE COURT:

No.

No, Your Honor.

I see.

questionnaire submitted.

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In any event, I want the

Thank you.

Now, actually two documents, something called a

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second questionnaire and a cap agreement, were either of those

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given to the plaintiff?

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MR. GINGRAS:

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THE COURT:

They were not, Your Honor.

Then I wanted to give the plaintiff an

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opportunity to -- yes.

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cited, and seemed to rely heavily on, a case captioned Monex v.

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Gilliam reported at 680 F.Supp. 2nd 1148.

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In your papers, you, the plaintiff,

I have considered that case.

That was the principal

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case that you cited.

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any extortion cases so, the only case that has been brought to

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my attention in these pleadings is the case that you have

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relied on.

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Interestingly, your opponent didn't cite

Is there anything that you want to tell me beyond

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what you've already described as to the significance of that

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case?

I have considered the case.

I'm just asking whether

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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there is something about that case beyond what you prescribed

and what I've read.

considered it.

the opportunity.

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Clearly it's an extortion case, and I've

You don't have to respond; I'm just giving you

MS. BORODKIN:

THE COURT:

MS. BORODKIN:

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The only case that either side -It's not.

Flatley was cited and

discussed in our opposition to the motion to strike.

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That is

the --

Your Honor, you're correct.

THE COURT:
you.

Let me ask you this -- all right.

You may be seated.

MS. BORODKIN:

Thank

Anything else?
Just the five things we were asking

for today in the terms of relief --

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THE COURT:

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The motion for summary judgment as to the extortion

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claim is granted.

Thank you very much.

You may be seated.

The -- and I'll issue an order.

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Will you be making a Rule 9B motion?

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MR. GINGRAS:

Your Honor, I'd probably prefer to see

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the court's order before I make that determination.

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said "extortion," I'm not sure if you refer to the RICO claim

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or extortion as simply one of the predicate acts to that claim.

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I think that makes a difference in terms of whether there is a

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RICO claim --

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THE COURT:

When you

With all due expect, sir, what you just

said didn't come together because all it takes is, in RICO, is

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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a pattern of racketeering activity which is described in terms

of specific predicate acts.

extortion is a predicate act.

Wire fraud is a predicate act;

Now, by granting the extortion predicate claim, that

means that the only basis for a RICO case would be wire fraud,

and of course it would require more than just an act of wire

fraud.

prerequisites.

to another case for a second.

It would require a pattern and all the other

I note -- just one moment -- let me just turn

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(Unrelated matter, not transcribed herein)

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THE COURT:

That means that if the plaintiff can

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prove a pattern of racketeering activity through wire fraud,

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then arguably if the other prerequisites of RICO are met,

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namely, enterprise, causation, injury, they have a claim.

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So what I am saying is that under RICO law, even

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though RICO itself doesn't have to be the subject of the

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heightened pleading requirement under Rule 9B, if a predicate

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act under RICO is subject to a heightened pleading requirement

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such as in this case, wire fraud, then it has to be done; and

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I'm just trying to be efficient about it.

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not withstand a Rule 9B motion.

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This complaint would

You don't have to make a Rule 9B motion, but if you

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did make one, it undoubtedly would be granted and it would

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compel the plaintiff to plead if they could with particularity.

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Then you could make a motion to dismiss, which would be ruled

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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upon.

discovery.

If motion were denied, then we would proceed to

And so while in light of what I've said earlier, a

further deposition of Magedson is not required.

plaintiff were able to sustain a pattern of racketeering

activity as to wire fraud, I would allow Magedson to be deposed

and for more than the hour and a half if they got into wire

fraud because that would be a new ball game.

If the

So rather than have you make a motion and have it

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responded to, the complaint is so patently deficient, I

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would -- if you made a motion, give the plaintiff -- grant the

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motion, allow the plaintiff an opportunity to replead.

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Do you have such a motion?

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MR. GINGRAS:

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THE COURT:

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MS. BORODKIN:

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Then your motion is granted.

Your Honor, if I could be heard on

that.

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THE COURT:

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MS. BORODKIN:

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I would, Your Honor.

Yes.

What do you want to be heard about?

On the motion to strike, you asked for

a RICO case statement --

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THE COURT:

I'm not -- ma'am, I don't think you're

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listening to what is going on.

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There was nothing about a RICO case statement.

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not following the colloquy.

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the wire fraud as a predicate act.

This is very distressing.

I think you're

We're focused on the pleading of

I said nothing about a RICO

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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case statement; I've not ordered a RICO case statement.

MS. BORODKIN:

I apologize.

THE COURT:

I'll grant the motion without prejudice, and how much

Yes, please.

time would you need to replead the RICO case?

replead it the same way except you would have to articulate

within Rule 9B the wire fraud.

How much time would you need, sir?

MR. BLACKERT:

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You could

About two weeks, Your Honor.

Is that

appropriate?

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THE COURT:

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MR. BLACKERT:

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THE COURT:

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until then.

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other claims.

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Two weeks.
Thank you, Your Honor.

The case remains in its bifurcated state

In other words, the RICO is bifurcated from the

And the other ruling I will make is this:

That in

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light of the lack of jury demand, it is a court trial.

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you.

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complaint is refiled, I'll give you 10 days thereafter to make

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a motion if you wish to dismiss, and if you don't make a motion

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to dismiss, notify us so you can begin your discovery.

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Thank

Then I'll set -- assuming that two weeks from now the

And then set up a hearing date, Paul, or schedule in

light of that.
We can do that in a minute order.

We'll send you a

minute order.

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE

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MR. GINGRAS:

THE COURT:

MR. GINGRAS:

Your Honor --

I don't want to hear any more.

I'm sorry.

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C E R T I F I C A T E

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I hereby certify that the foregoing is a true and

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correct transcript from the stenographic record of

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the proceedings in the foregoing matter.

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July 29, 2010

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__________________________

___________________

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Deborah K. Gackle
Official Court Reporter
CSR No. 7106

Date

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UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

COURT REPORTER DEBORAH K. GACKLE