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State ex rel. Balderas v. Real Estate Law Center, P.C.

United States District Court, D. New Mexico

July 2, 2019

STATE OF NEW MEXICO, ex rel., HECTOR BALDERAS, Attorney General of New Mexico, Plaintiff,
v.
REAL ESTATE LAW CENTER, P.C., a California professional corporation; ERIKSON M. DAVIS, an attorney and resident of California, individually, and dba Real Estate Law Center, P.C., a California professional corporation; DEEPAK S. PARWATIKAR, an attorney and resident of California, individually, and dba Balanced Legal Group, an unidentified trade name or entity, dba www.pinnaclelawcenter.com; CHAD T. PRATT, an attorney and resident of California, individually, and formerly dba Real Estate Law Center, P.C.; the BALANCED LEGAL GROUP, an unidentified trade name or entity located in California, and PINNACLE LAW CENTER, P.C., a California professional corporation, Defendants.

          Hector H. Balderas Attorney General of the State of New Mexico Lisa Giandomenico Angelica Anaya-Allen Assistant Attorney General of the State of New Mexico Attorney General of the State of New Mexico's Office Santa Fe, New Mexico Attorneys for the Plaintiff.

          Real Estate Law Center, P.C. Los Angeles, California Defendant.

          Chad Thomas Pratt Los Angeles, California Defendant pro se Paul J. Kennedy Jessica M. Hernandez Elizabeth Harrison Kennedy, Hernandez & Associates, P.C. Albuquerque, New Mexico Attorneys for Defendants Deepak S. Parwatikar, Pinnacle Law Center, PC, and Balanced Legal Group.

          Erikson M. Davis Newbury Park, California Defendant pro se.

          MEMORANDUM OPINION AND ORDER

         THIS MATTER comes before the Court on: (i) the Defendant Deepak S. Parwatikar's Motion for Summary Judgment, filed April 25, 2019 (Doc. 132)(“MSJ”); (ii) the Notice of Joinder of Chad T-W Pratt, Sr. In Motion for Summary Judgment, filed May 3, 2019 (Doc. 135)(“Joinder”);[1] and the Defendant Parwatikar's Objections to Plaintiff's Untimely Filings and Disclosures, filed May 25, 2019 (Doc. 147)(“Marked Exhibits Objections”). The Court held a hearing on May 28, 2019. See Clerk's Minutes at 1, filed May 28, 2019 (Doc. 151). The primary issues are: (i) whether Plaintiff State of New Mexico has shown a genuine issue of material fact whether Defendants Deepak S. Parwatikar, [2] Balanced Legal Group, and Pinnacle Law Center, P.C., (collectively, the “Parwatikar Defendants”), and Defendant Chad T. Pratt[3] violated the Mortgage Assistance Relief Services (“MARS”) Rule, 12 C.F.R. § 1015, [4] by accepting advance payment for mortgage assistance relief services as alleged in Count I of the Complaint for Violations of the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act (MFCFPA), 5 Mortgage Assistance Relief Services (MARS) Rule, the New Mexico Unfair Practices Act (UPA)[6] and Petition for Injunctive Relief ¶¶ 77-85, at 18-19, filed February 22, 2017 (Doc. 1)(“Complaint”); (ii) whether New Mexico has shown a genuine issue of material fact whether the Parwatikar Defendants and Mr. Pratt violated the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act, N.M. Stat. Ann. §§ 47-15-1 to -8 (“MFCFP”), by failing to conform to the MFCFP's requirements for foreclosure consultant contracts and by requesting advance fees for foreclosure consultant services as the Complaint's Count II alleges, see Complaint ¶¶ 86-101, at 19-22; (iii) whether New Mexico has shown a genuine issue of material fact whether the Parwatikar Defendants and Mr. Pratt violated the New Mexico Unfair Practices Act, N.M. Stat. Ann. §§ 57-12-1 to -26 (“NMUPA”), by requiring from New Mexico consumers an advance fee and monthly maintenance payments for sham lawsuits, by promising valuable legal services while filing the value of which was disproportionate to the value paid, and by promising foreclosure lawsuit defense but not providing such services, as the Complaint's Count III alleges, see Complaint ¶¶ 102-108, at 22-23; and (iv) whether New Mexico has established a genuine issue of material fact justifying injunctive relief barring the Parwatikar Defendants and Mr. Pratt from engaging in those practices enumerated in items (i) through (iii) and from engaging in the unauthorized practice of law as the Complaint's Count IV alleges, see Complaint ¶¶ 109-11, at 23. The Court grants the MSJ and the Joinder in part and denies them in part. The Court concludes that New Mexico has shown a genuine issue of material fact whether: (i) the Parwatikar Defendants and Mr. Pratt are liable for MARS Rule violations; and (ii) the Parwatikar Defendants and Mr. Pratt are liable for MFCFP violations. Specifically, genuine disputes of material fact exist whether Defendant Real Estate Law Center, P.C. violated the MARS Rule and the MFCFP; whether Real Estate Law, Balanced Legal, and Pinnacle Law operated a common enterprise such that Balanced Legal and Pinnacle Law are liable for Real Estate Law's alleged MARS Rule and MFCFP violations;[7] whether Mr. Parwatikar and Mr. Pratt are individually liable for Real Estate Law's alleged MARS Rule and MFCFP violations;[8] whether Mr. Parwatikar and Pinnacle Law substantially assisted the other Defendants' alleged MARS Rule violations;[9] and what penalties the Court should assess should it find the Parwatikar Defendants and Mr. Pratt liable for the MARS Rule and the MFCFP violations.[10] New Mexico has not produced, however, sufficient evidence to survive summary judgment on a theory based on Defendant Erickson Davis'[11] alleged MARS Rule violations; on Balanced Legal and Pinnacle Law's violation of the MARS Rule independent of Real Estate Law; on Mr. Parwatikar's and Mr. Pratt's participation in a common enterprise with Real Estate Law, Balanced Legal, and Pinnacle Law; and on Mr. Pratt's reckless or knowing violation of the MARS Rule, or willful violation of the MFCFPA, so the Court grants summary judgment in the Parwatikar Defendants' and Mr. Pratt's favor on these theories. The Court concludes, furthermore, that New Mexico has not established a genuine issue of material fact whether: (i) the Parwatikar Defendants and Mr. Pratt are liable for NMUPA violations other than the MFCFP violations;[12] and (ii) New Mexico is entitled to injunctive relief. As New Mexico has not produced evidence on which a reasonable factfinder could conclude that Real Estate Law knowingly made false or misleading misrepresentations such that New Mexico can establish its unfair or deceptive practices claims, [13] and has not shown sufficient evidence on which a reasonable factfinder could conclude that Real Estate Law engaged in unconscionable practices, New Mexico cannot show the Parwatikar Defendant's or Mr. Pratt's liability for the non-MFCFP NMUPA violations. New Mexico has also not produced evidence of ongoing, continuous, or recent MARS Rule, MFCFP, or other NMUPA violations to survive summary judgment on its requests for injunctive relief. The Court overrules the Parwatikar Defendants' objections in the Marked Exhibits Objections, because the Marked Exhibits attached to the Plaintiff's Notice of Filing of Marked Exhibits to Response to Motion for Summary Judgment at 1, filed May 24, 2019 (Doc. 145)(“Marked Exhibits Notice”), will help the Court decide the MSJ and the Joinder, and because the Marked Exhibits differ from the exhibits attached to the Plaintiff's Response to Parwatikar Motion for Summary Judgment, filed May 10, 2019 (Doc. 137)(“MSJ Response”), only in that, in the Marked Exhibits, New Mexico highlights excerpts for the Court's attention.

         FACTUAL BACKGROUND

         The Court draws the factual background from the parties' undisputed material facts in: (i) the MSJ; (ii) the MSJ Response; (iii) the Joinder; and (iv) the Plaintiffs' Response to Pratt's Notice of Joinder in Motion for Summary Judgment, filed May 13, 2019 (Doc. 140)(“Joinder Response”). Mr. Parwatikar owns Pinnacle Law and owned Balanced Legal. See MSJ Response ¶ 16, at 8 (asserting this fact)(citing Defendant Deepak Parwatikar's Answers, Responses and Objections to Plaintiff's First Set of Interrogatives and Requests for Production, Interrogatory No. 1, at 1-2, filed May 24, 2019 (Doc. 145-1)[14](“Parwatikar First Set Response”); Consulting Agreement at 1, filed May 24, 2019 (Doc. 145-1); Deposition of Deepak S. Parwatikar at 70:1-71:2 (taken May 9, 2018), filed May 25, 2019 (Doc. 145-1)(“Parwatikar Depo. Doc. 145-1”)[15]); Reply in Support of Defendant's Motion for Summary Judgment at 6, filed May 24, 2019 (Doc. 146)(“MSJ Reply”)(admitting this fact). In 2010, prior to Real Estate Law's foundation, the Attorney General for the State of Minnesota sued Mr. Parwatikar and Balanced Legal for charging advance fees for mortgage modification services. See MSJ Response ¶ 7, at 4 (asserting this fact)(citing Minnesota v. Balanced Legal Group, Case No. 27 CV 10-27052 (4th Jud. Dist. Minn. 2010)(“Minn. v. Balanced Legal & Parwatikar”);[16] Parwatikar Depo. Doc. 145-1 at 70:1-73:25).[17] After this suit, in 2011, Mr. Parwatikar and Pinnacle Law helped Adlore Clarambeau[18] incorporate Real Estate Law. See MSJ Response ¶ 15, at 8 (asserting this fact)(citing Parwatikar Depo. Doc. 145-1 at 20:19-25:25).[19] Clarambeau, see MSJ ¶ 1, at 2 (asserting this fact)(citing Deposition of Deepak S. Parwatikar at 25:8-9, filed April 25, 2019 (Doc. 132-1)(“Parwatikar Depo. Doc. 132-1”)), Mr. Pratt, see MSJ ¶ 1, at 2 (asserting this fact)(citing Parwatikar Depo. Doc. 132-1 at 26:8-13), and Davis consecutively owned Real Estate Law Center, see MSJ ¶ 1, at 2 (asserting this fact)(citing Parwatikar Depo. Doc. 132-1 at 108:12-13, id. at 108:17-19). See also MSJ Response ¶ 1, at 2 (admitting with this sentence's facts).

         “Sometime between 2011 and 2013, RELC [(Real Estate Law)] used an attorney-client fee agreement with clients, which purported to charge a $5, 000 retainer, 80% of which would be paid to Pinnacle Law Center.” MSJ ¶ 2, at 2-3 (asserting this fact)(citing Complaint ¶¶ 21, 46, at 6, 10).[20] See MSJ Response ¶ 1, at 2 (admitting this fact). Such provisions affected the twenty-three New Mexico consumers that the Complaint identifies. See MSJ ¶ 2, at 2 (asserting this fact)(citing Plaintiff's Second Supplemental Response to Defendant Parwatikar's First Set of Interrogatories, and Requests for Production, Interrogatory No. 10, at 11, filed April 25, 2019 (Doc. 132-3)(“New Mexico Second Set Response”)); MSJ Response ¶ 1, at 2 (admitting this fact). Mr. Parwatikar knew that Real Estate Law engaged in mass joinder lawsuits and mortgage modification. See MSJ Response ¶ 15, at 8 (asserting this fact)(citing Parwatikar Depo. Doc. 145-1 at 82:9-13).[21] In 2013, the State Bar of California undertook disciplinary actions against Mr. Pratt in connection with Real Estate Law, and such actions culminated in his disbarment in 2013. See MSJ Response ¶ 8, at 4 (asserting this fact)(citing In the Matter of Chad Thomas Pratt, Nos. 13-O-12312 (13-O-12367; 13-O-12757)(State Bar Ct. Cal. Sept. 18, 2014), aff'd, No. S222942 (Cal. Jan. 29, 2015)(“In re Pratt”)).[22] The State Bar of California also subjected Davis to multiple disciplinary actions before disbarring him for his misconduct at Real Estate Law. See MSJ Response ¶ 9, at 4-5 (asserting this fact)(citing In the Matter of: Erikson McDonnell Davis, Case No. 16-O-13378, Stipulation re: Facts, Conclusions of Law and Disposition and Order Approving, Order of Involuntary Inactive Enrollment, Disbarment (State Bar Ct. Cal. April 17, 2017), http://members.calbar.ca.gov/fal/Licensee/Detail/197841 (last visited June 26, 2019)(“2017 In re Davis Stipulation”), aff'd, Case No. S242390 (Cal. August 22, 2017); In the Matter of: Erikson McDonnell Davis, No. 15-O-14599, Stipulation re: Facts, Conclusions of Law and Disposition and Order Approving Actual Suspension (State Bar Ct. Cal. July 21, 2016), http://members.calbar.ca.gov/fal/Licensee/Detail/197841 (last visited June 26, 2019)(“2016 In re Davis Stipulation”), aff'd, Case Nos. S237442 (Cal. Dec. 7, 2016))(collectively, “In re Davis”)).[23]

         In Alexander v. Wells Fargo Bank, Case No. 2:14-cv-01303-R-CW (C.D. Cal.), in granting Mr. Davis' voluntary dismissal, the Honorable Manuel L. Real, then-United States District Judge for the United States District Court for the Central District of California, concluded that “Erikson Davis, had acted in bad faith ‘because [the allegations] indicate that the Complaint was filed without any concern over whether it was legally or factually plausible, '” and, in awarding the defendant sanctions of $126, 400.00, stated: “‘The amount of this sanction is appropriate in light of the frivolous nature of the Complaint, the blatant misjoinder of Plaintiffs, and Plaintiffs' Counsel's voluntary dismissal of the case to avoid an adverse ruling.'” MSJ Response ¶ 10, at 5 (asserting this fact)(emphasis from MSJ Response omitted)(quoting Alexander v. Wells Fargo Bank, Case No. 2:14-cv-01303-R-CW, Order Granting in Part and Denying in Part Wells Fargo's Motion for Attorneys' Fees, at 4, 5 (C.D. Cal. filed June 11, 2014 Doc. 34)(“Alexander v. Wells Fargo Bank Fees Order”).[24] Judge Real then entered a stipulated judgment awarding Defendant Wells Fargo Bank $227, 251.00 in sanctions and fees, inclusive of the other sanctions. See MSJ Response ¶ 10, at 5 (asserting this fact)(citing Alexander v. Wells Fargo Bank, Case No. 2:14-cv-01303-R-CW, Stipulated Judgment at 3 (C.D. Cal. filed August 4, 2014 Doc. 42)(“Alexander v. Wells Fargo Bank Stipulated Judgment”).[25] Likewise, in Aghaji v. Bank of America, 202 Cal.Rptr.3d 619 (Cal.Ct.App. 2016), the California Court of Appeals upheld a dismissal of twenty-two consolidated cases, and because, after “‘four failed attempts to allege a justiciable action, there was no reasonable possibility that additional amendment would cure the defects'”; “the plaintiffs failed to show that their proposed additional facts supported an unfair business practices claim, ” and the plaintiffs' claims were misjoined, as they did not arise from the same transaction or occurrence. MSJ Response ¶ 11, at 6 (asserting this fact)(quoting 202 Cal.Rptr.3d at 625; and citing 202 Cal.Rptr.3d at 622).[26] Similarly, in Armstrong v. Nationstar, No. MISC15-01122 (Super. Ct. Cal. July 14, 2016), the court sustained a “demurrer filed by Nationstar and dismiss[ed a] mass joinder case filed by RELC.” MSJ Response ¶ 11, at 6 (asserting this fact)(citing Armstrong v. Nationstar, 2016 WL 7321864[27]).[28]

         In representing New Mexico consumer Larry Madrid, Real Estate Law asked him to pay $5, 000.00 in advance fees, with a $29.95 monthly maintenance fee. See MSJ Response ¶ 13, at 7 (asserting this fact)(citing Email from Green By Phone to Larry C. Madrid at 1 (dated May 16, 2013), filed May 10, 2019 (Doc. 137-5)[29](“Receipt Email”)).[30] Real Estate Law told Madrid that it “would lower his payments and stop or prevent the foreclosure of his home, ” and “described itself as a ‘powerhouse law firm.'” MSJ Response ¶ 13, at 7 (asserting this fact)(citing Email from Keith Anthony, Real Estate Law Center PC to Larry Madrid at 1 (dated May 15, 2013), filed May 10, 2019 (Doc. 137-5)(“Anthony Email”); Information Packet at 1, filed May 10, 2019 (Doc. 137-5)).[31] Real Estate Law provided Madrid a retainer agreement with a provision describing a fee-splitting agreement with Pinnacle Law and a “‘Foreclosure Defense Checklist' that was nothing more than a loan modification application.” MSJ Response ¶ 13, at 7 (asserting this fact)(citing Attorney-Client Fee Agreement ¶ 10, at 3, filed May 10, 2019 (Doc. 137-5); Email and FDD[32]Package Attachment from germain@lenderlawlitigation.com to Larry Madrid at 2 (sent November 6, 2012), filed May 10, 2019 (Doc. 137-5)(“Germain Email and FDD Package”)).[33] The FDD Package that Real Estate Law sent Madrid includes forms referencing Balanced Legal. See MSJ Response ¶ 13, at 7 (asserting this fact)(citing Germain Email and FDD Package at 7-8).[34] In 2013, Madrid received an email from Real Estate Law stating: “‘Currently, we have dismissed the case and are waiting to re-file. It is our intention to gain the most favorable outcome for our clients; therefore, we are seeking to have this matter assigned to an overseeing judge who we believe will render a more favorable judgment for all litigants.'” MSJ Response ¶ 13, at 7 (asserting this fact)quoting Letter from Ashley Hanu to Larry Madrid at 1 (dated January 18, 2013), filed May 10, 2019 (Doc. 137-5)).[35]

         PROCEDURAL BACKGROUND

         New Mexico claims that: (i) the Defendants violated the MARS Rule by accepting advance payment for mortgage relief services, and/or Mr. Parwatikar and Pinnacle Law substantially assisted the violations, see Complaint ¶¶ 77-85, at 18-19; (ii) the Defendants, willfully and in bad faith, violated the MFCFPA, by failing to provide required warnings, notices, and disclosures, by failing to give New Mexico homeowners twenty-four hours before signing attorney-client agreements, and by requiring advance payment for their services, see Complaint ¶¶ 86-101, at 19-22; and (iii) the Defendants knowingly engaged in unlawful conduct violating the NMUPA by requiring advance fees and monthly maintenance fees while filing sham lawsuits, by leading New Mexico consumers to believe that the Defendants performed valuable legal services when the Defendants filed sham lawsuits with no value for New Mexico consumers, and by allowing New Mexico consumers to believe that the Defendants will defend foreclosure lawsuits, see Complaint ¶¶ 102-108, at 22-23. New Mexico asks that the Court enjoin the Defendants from continuing such violations, see Complaint ¶¶ 109-11, G, at 23-24, and requests restitution, disgorgement, civil penalties, and costs as the MARS Rule, the MFCFP, and the NMUPA permit, see Complaint ¶¶ (A)-(F), at 24. The Parwatikar Defendants and Mr. Pratt are the only Defendants remaining in this case on liability issues. On June 11, 2018, the Court entered a default judgment against Real Estate Law. See Default Judgment Against Real Estate Law Center at 1-2, filed June 11, 2018 (Doc. 75). On November 5, 2018, the Honorable Laura Fashing, United States Magistrate Judge for the United States District Court for the District of New Mexico, recommended entering a default judgment against Mr. Davis on issues of liability, reserving for litigation the issues of relief, see Proposed Findings and Recommended Disposition at 4, filed November 5, 2018 (Doc. 91), and, on January 18, 2019, the Court adopted Magistrate Judge Fashing's recommendation, see Memorandum Opinion and Order Adopting the Magistrate Judge's Proposed Findings and Recommended Disposition at 2, 9, filed January 18, 2019 (Doc. 106).

         1. The MSJ.

         The Parwatikar Defendants argue that a person violates the MARS Rule when that person either engages in prohibited representations, [36] see MSJ at 4-5 (citing 12 C.F.R. § 1015.3), or “provid[es] substantial assistance or support to any mortgage assistance relief service provider when that person knows or consciously avoids knowing that the provider is engaged in any act or practice that violates this rule, ” MSJ at 5 (quoting 12 C.F.R§ 1015.6). The Parwatikar Defendants aver that New Mexico bases Mr. Parwatikar's liability on the substantial assistance theory and that New Mexico cannot show that Mr. Parwatikar “substantially assisted” Real Estate Law's MARS Rule violations, because New Mexico cannot show that Real Estate Law collected advance fees for mortgage assistance relief services, rather than for litigation services. MSJ at 5. They add that New Mexico cannot show that Mr. Parwatikar substantially assisted any MARS Rule violations or knew of the violations -- as the MARS Rule requires for substantial assistance liability -- because Mr. Parwatikar does not own Real Estate Law, and did not write or know of the attorney-client fee agreements' provisions until 2013, when he objected to his involvement with these agreements. See MSJ at 5.

         The Parwatikar Defendants next aver that New Mexico cannot show that Mr. Parwatikar violated the MFCFP. See MSJ at 5. According to the Parwatikar Defendants, to establish this claim, New Mexico must show that Mr. Parwatikar was a foreclosure consultant --

“a person who, directly or indirectly, makes a solicitation or offer to an owner to perform services for compensation or who, for compensation, performs a service that the person represents will: (a) stop or postpone a foreclosure sale; . . . (g) avoid or ameliorate the impairment of an owner's credit resulting from the recording of a notice of default or from a foreclosure sale; or (h) otherwise save an owner's residence from foreclosure.”

MSJ at 5-6 (quoting N.M. Stat. Ann. § 47-15-2(B)(1)(a), (g), (h)). According to the Parwatikar Defendants,

'"[s]ervices,' as defined in the statute, include:
(1) debt, budget or financial counseling of any type;
(2) receiving money for the purpose of distributing it to creditors in payment or partial payment of an obligation secured by a lien on a residence in foreclosure;
(3) contacting creditors on behalf of an owner;
(4) arranging or attempting to arrange for an extension of the period within which the owner of a residence in foreclosure may cure the owner's default and reinstate the owner's obligation;
(5) arranging or attempting to arrange for a delay or postponement of the time of sale of the residence in foreclosure;
(6) advising the filing of any document or assisting in any manner in the preparation of any document for filing with a bankruptcy court; or
(7) giving advice, explanation or instruction to an owner, which in any manner relates to the cure of a default in or the reinstatement of an obligation secured by a lien on the residence in foreclosure, the full satisfaction of that obligation, or the postponement or avoidance of a sale of a residence in foreclosure, pursuant to a power of sale contained in a mortgage.

MSJ at 6 (quoting N.M. Stat. Ann. § 47-15-2(G)). In the Parwatikar Defendants' view, such services do not include law firm consulting services, and a law firm is not an “‘owner'” for the MFCFP's purposes. MSJ at 6 (quoting N.M. Stat. Ann. § 47-15-2(D)). The Parwatikar Defendants argue that New Mexico can only prosecute MFCFP violations related to interactions with New Mexico consumers, and that, to establish such a violation, New Mexico must show:

(1) that Mr. Parwatikar either “ma[de] a solicitation or offer to an owner to perform services” or actually “performed] a service” for a New Mexico owner of a residence in foreclosure, NMSA 1978 § 47-15-2(B)(1); (2) that he received or requested “compensation, ” id; (3) that this compensation was for “services” as described in NMSA 1978, § 47-15-2(G); and (4) that he “represent[ed]” that such services would “stop or postpone a foreclosure sale, ” affect a homeowner's credit, or “otherwise save an owner's residence from foreclosure, ” NMSA 1978 § 47-15-2(B)(1)(a), (g), (h); cf. Compl., at ¶ 87[, at 20].

         MSJ at 6-7. According to the Parwatikar Defendants, New Mexico cannot show that Mr. Parwatikar performed mortgage relief services for New Mexico consumers or even handled files related to those consumers. See MSJ at 7. Additionally, according to the Parwatikar Defendants, New Mexico bases its claim on attorney-client fee agreements that “possibly affected twelve consumers prior to 2013, ” has no evidence that Mr. Parwatikar received compensation from these New Mexico consumers or that Real Estate Law paid him anything other than business consulting fees, and has established no communications between Mr. Parwatikar and the New Mexico consumers or representations that Mr. Parwatikar made the New Mexico consumers. See MSJ at 7.

         The Parwatikar Defendants then aver that New Mexico cannot show that Mr. Parwatikar violated the NMUPA. See MSJ at 7. The Parwatikar Defendants set forth four factors for an NMUPA violation:

“First, the complaining party must show that the defendant made an oral or written statement, visual description, or other representation that was either false or misleading. Second, the false or misleading representation must have been knowingly made in connection with the sale, lease, rental or loan of goods or services. Third, the conduct complained of must have occurred in the regular course of the defendant's trade or commerce. And fourth, the representation must have been of the type that may, tends to, or does deceive or mislead any person.”

MSJ at 8 (quoting Inge v. McClelland, 257 F.Supp.3d 1158, 1170 (D.N.M. 2017)(Browning, J.), aff'd, 725 Fed.Appx. 634 (10th Cir. 2018)(unpublished)). According to the Parwatikar Defendants, New Mexico cannot satisfy the first element -- making false or misleading comments -- because it cannot show that Mr. Parwatikar communicated with New Mexico consumers. See MSJ at 8. Second, the Parwatikar Defendants argue that Mr. Parwatikar did not agree to litigate for Real Estate Law and that New Mexico has only “slight” evidence of his participation in the New Mexico consumers' lawsuits. MSJ at 8. Third, according to the Parwatikar Defendants, the third element -- the knowing element -- was satisfied in late 2013, at which time Real Estate Law's attorney-client agreements were re-written to remove any alleged contact between Mr. Parwatikar and the New Mexico consumers. See MSJ at 8.

         The Parwatikar Defendants then defend against New Mexico's injunctive relief request. See MSJ at 8-9. First, the Parwatikar Defendants aver that N.M. Stat. Ann. “§ 36-2-28.2 permits an attorney general to seek an injunction when individuals are practicing law without authorization or aiding or abetting other persons in the unauthorized practice of law, ” but that New Mexico has not alleged unauthorized practice of law in New Mexico, so no unauthorized practice exists to enjoin. MSJ at 8-9. Second, according to the Parwatikar Defendants, N.M. Stat. Ann. “§ 57-12- 8(B) permits some injunctive relief based on violations of the UPA, ” but New Mexico has established no NMUPA violations by Mr. Parwatikar, because he made no representations to the New Mexico consumers, and because it has shown no continuing NMUPA violations. MSJ at 9. Third, in the Parwatikar Defendants' views, a “state's attorney general may seek injunctive relief pursuant to 12 U.S.C. § 5538(b)(1)(A) where a case involves ongoing MARS Rule violations, ” but New Mexico has not established Mr. Parwatikar's liability for a MARS Rule violation and has not shown any continuing MARS Rule violations. MSJ at 9. Last, the Parwatikar Defendants argue that New Mexico cannot obtain a preliminary injunction as N.M. R. Ann. 1-006 permits, because New Mexico cannot satisfy the four preliminary injunction factors:

(1) it will suffer irreparable injury unless the injunction is granted; (2) the threatened injury outweighs any damage the injunction might cause the defendant;
(3) issuance of the injunction will not be adverse to the public's interest; and
(4) there is a substantial likelihood that the plaintiff will prevail on the merits.

MSJ at 9 (citing LaBalbo v. Hymes, 1993-NMCA-010, ¶ 11, 850 P.2d 1017, 1021). According to the Parwatikar Defendants, New Mexico is not likely to succeed on the merits, and cannot show a threat of irreparable injury. See MSJ at 9.

         2. The MSJ Response.

         New Mexico responds. See MSJ Response at 1-19. New Mexico begins by arguing that it has shown sufficient evidence to establish a genuine dispute of material fact whether Real Estate Law and the Parwatikar Defendants violated the MARS Rule. See MSJ Response at 8. New Mexico explains that the Defendants filed frivolous lawsuits to hide that they charged advance fees for mortgage modification services. See MSJ Response at 8. According to New Mexico, in March, 2012, the Federal Trade Commission (“FTC”) issued a consumer warning: “A new scam is targeting financially strapped homeowners across the country. So-called specialized law firms are sending invitations to homeowners, urging them to participate in ‘mass joinder' lawsuits against their mortgage lenders as a way to get favorable loan modifications and stop foreclosure.” MSJ Response at 8 (citing Mass Joinder Lawsuits, Federal Trade Commission, https://www.consumer.ftc.gov/articles/0256-mass-joinder-lawsuits (last visited June 17, 2019)). New Mexico identifies Real Estate Law's actions as such a scheme. See MSJ Response at 9. According to New Mexico, in In re Pratt the State Bar of California concluded that Mr. Pratt filed “‘meritless lawsuits' against lenders in exchange for advanced fees.” MSJ Response at 9. New Mexico describes that, in operating Real Estate Law, Mr. Pratt used non-attorneys engaged in the unauthorized practice of law, did not account for the fees that he claimed to have earned, and did not refund unearned fees. See MSJ Response at 9 (citing In the Matter of Chad Thomas Pratt, Decision at 1, (State Bar Cal. Sept. 18, 2014), http://members.calbar.ca.gov/fal/Licensee/Detail/149746 (last visited June 17, 2019)(“ In re Pratt Decision”)).

         New Mexico argues that other courts have concluded that Real Estate Law “violated prohibitions on advance fees for mortgage modification services.” MSJ Response at 9. New Mexico explains that the State Bar of California concluded that Real Estate Law “‘was in the business of assisting client in obtaining loan modifications by challenging consumer and real estate lender practices.'” MSJ Response at 9 quoting In Re Pratt Decision at 3). New Mexico also describes Davis' disciplinary suits. See MSJ Response at 10 (citing generally 2016 In re Davis Stipulation; 2017 In re Davis Stipulation). New Mexico explains that Davis was the subject of several suits and was eventually disbarred for his activities at Real Estate Law, and that, in 2013, Davis assumed ownership over Real Estate Law from Mr. Pratt. See MSJ Response at 10. New Mexico notes that the Supreme Court of California approved the State Bar of California's decisions. See MSJ Response at 10 (citing In re Erikson McDonnell Davis on Discipline, Case No. S237442 ( S.Ct. Cal. December 7, 2016), affd, Case No. S242390 ( S.Ct. Cal. August 22, 2017)). New Mexico describes that Davis stipulated:

a. “At all times relevant to the facts herein, RELC: (i) obtained clients through advertising using mail, television, and the internet; (ii) utilized non-attorney staff to meet with prospective clients; (iii) attempted to assist its clients in obtaining loan modifications by challenging the practices of their lenders and service providers; and (v) [sic] used mass joinder lawsuits and individual lawsuits in an attempt to achieve its loan modification goals.”
b. “All of the complainants herein originally approached RELC to assist them with obtaining modifications of their respective home loans. Ultimately, all of the complainants filed fee agreements with RELC, which provided that they hired the firm to pursue litigation against their respective lenders. The fee agreements required the complainants to pay RELC an advanced fee (“AF”). The fee agreement also required the complainants to pay RELC a monthly “maintenance fee” (“MF”); however the firm did not collect a maintenance fee from every client.”
c. “Respondent failed to adequately supervise RELC's non-attorney staff, which allowed them to represent to the complainants herein, prior to an attorney's review and evaluation of each of their respective matters, that RELC would represent them in litigation against their respective lenders for the initial advanced fee specified below, plus a monthly maintenance fee.”

MSJ Response at 10-11 (quoting 2017 In re Davis Stipulation at 6, 7). New Mexico also directs the Court to the proceedings in and results of Alexander v. Wells Fargo Bank, Aghaji v. Bank of America, and Armstrong v. Nationstar, recited in the Factual Background, as evidence of the lawsuits' frivolousness. See MSJ Response at 11-12.

         According to New Mexico, the Parwatikar Defendants provided at least substantial assistance and support in violation of the MARS Rule. See MSJ Response at 12 (citing 12 CF.R § 1015.6; FTC. v. Lake, 181 F.Supp.3d 692 (D. Ct. Cal. 2016)(Carney, J.)). New Mexico describes that Mr. Parwatikar arranged his relationship with Real Estate Law in the way that he did to avoid liability. See MSJ Response at 12 (citing FTC. v. Lake, 181 F.Supp.3d at 692). New Mexico contends that, after Minn. v. Balanced Legal & Parwatikar, in which the Attorney General of Minnesota charged Mr. Parwatikar and Balanced Legal with violating advance fee prohibitions, Mr. Parwatikar knew the MARS Rule's prohibitions. See MSJ Response at 13.

         Further, New Mexico avers that it has alleged a common enterprise between the Defendants. See MSJ Response at 13. According to New Mexico, the Declaration and Affidavit of Susan M. Murphy, filed May 24, 2019 (Doc. 145-1)(“Murphy Decl.”), shows a genuine issue of material fact what relationship Mr. Parwatikar had with Real Estate Law. See MSJ Response at 13. New Mexico also describes:

Forms sent by RELC to New Mexico consumer Larry Madrid reference Balanced Legal Group. [German Email and FDD Package at 7, 8]. Both forms are title[d] REAL ESTATE LAW CENTER PC. The “1st Mortgage Authorization Form” contains a paragraph stating: “This form will serve to acknowledge that the captioned mortgagor has authorized our firm, Balanced Legal Group to act in their behalf to resolve their mortgage problems.” The “2d Mortgage Authorization Form” contains identical language referencing Balanced Legal Group.

MSJ Response at 13 (quoting Germain Email and FDD Package at 7-8). New Mexico argues:

In Florida v. Berger Law Group, the U.S. District Court for the Middle District of Florida entered a default and final judgment against defaulting defendants for actions virtually identical to those of Real Estate Law Center. Office of the Attorney General and The State of Floriday v. Berger Law Group et al, Case No. 8:14-cv-1825-T-30MAP [Doc 132] (M.D. Fla. October 9, 2015). In the Berger case, the defendants held themselves out as a law firm, promising legal representation in mass joinder lawsuits, requiring advance fees and, in actuality, providing mortgage modification services in violation of Regulation O [the MARS Rule] and Florida and Connecticut consumer protection laws. The Berger Court awarded a money judgment of $1, 914, 669 for consumer restitution and civil penalties of $3, 875, 000. Id.

MSJ Response at 13.

         New Mexico also argues that a genuine issue of material fact exists whether the Parwatikar Defendants violated the MFCFP. See MSJ Response at 14. New Mexico avers that a common enterprise existed between Real Estate Law and the Parwatikar Defendants. See MSJ Response at 14 (citing Germain Email and FDD Package at 7-8). According to New Mexico, therefore, the Court could conclude “that the Parwatikar Defendants directly (the fee-splitting agreement) and indirectly (through the common enterprise and Parwatikar's actions in supervising and directing the work of RELC) acted as foreclosure consultants within the meaning of the MFCFPA.” MSJ Response at 14. To support this argument, New Mexico lists several of Mr. Parwatikar's actions relating to Real Estate Law: (i) “Parwatikar directed an RELC attorney to work on a loan modification for a client of RELC, ” MSJ Response at 14 (citing Email from Deepak Parwatikar to Susan Murphy at 1 (sent February 13, 2013), filed May 24, 2019 (Doc. 145-1)(“Feb. 13 Email”)); (ii) “Parwatikar ordered the RELC attorneys not to work on client matters until payment was received, ” MSJ Response at 14 (citing Email from Deepak Parwatikar to Susan Murphy at 1-2 (sent April 5, 2013), filed May 24, 2019 (Doc. 145-1)(“April 5 Email”); (iii) “Parwatikar was on an RELC telephone list, ” MSJ Response at 14 (citing Real Estate Law Center, PC Telephone List at 1, filed May 10, 2019 (Doc. 132-1)(“Telephone List”)); and (iv) “Parwatikar was deeply involved in running RELC, in addition to having assisted in incorporating RELC, and having been paid over $3 million by RELC, ” MSJ Response at 14 (citing Parwatikar First Set Response, Interrogatory No. 13, at 9; Murphy Decl. ¶¶ 1-13, at 1-2; Parwatikar Depo. Doc. 145-1 at 20:19-21:8). According to New Mexico, In re Pratt and In Re Davis confirm Real Estate Law's MFCFP violations. See MSJ Response at 14.

         Additionally, New Mexico avers that Real Estate Law provided Madrid foreclosure consultant services; Real Estate Law: (i) told Madrid “it could stop or postpone the foreclosure sale of his home, ” MSJ Response at 14-15 (citing N.M. Stat. Ann. § 47-15-2(B)(1)(a), (h)); and (ii) provided “debt counseling, contacting creditors on behalf of an owner, delaying a foreclosure sale, ” MSJ Response at 15 (citing N.M. Stat. Ann. § 47-15-2(G)(1), (3), (5)). According to New Mexico, Real Estate Law violated the MFCFP, because it: (i) failed to provide the MFCFP's required notices, see MSJ Response at 15 (citing N.M. Stat. Ann. § 47-15-3); (ii) failed to provide a right of recession, see MSJ Response at 15 (citing N.M. Stat. Ann. § 47-15-4); (iii) charged advance fees, see MSJ Response at 15 (citing N.M. Stat. Ann. § 47-15-4(A)); and (iv) required that, in the case of a lawsuit arising from Real Estate Law's services, New Mexico consumers consent to jurisdiction outside New Mexico and that Madrid agree to a venue outside Madrid's county of residence, see MSJ Response at 15 (citing N.M. Stat. Ann. § 47-15-5(G)). New Mexico adds: “Not only did Mr. Madrid's Attorney-Client Fee Agreement provide that Pinnacle would receive 80% of the retainer fee, but the Foreclosure Defense documents state that Mr. Madrid is authorizing Balanced Legal Group to act on his behalf.” MSJ Response at 15 (citing Attorney-Client Fee Agreement ¶ 10, at 2; Germain Email and FDD Package at 7-8). New Mexico argues that, even under the Parwatikar Defendants' theory of the case, Pinnacle Law received over $3 million from Real Estate Law in compensation, purportedly for consulting services, but actually for services furthering Real Estate Law's foreclosure consultant services. See MSJ Response at 15.

         New Mexico next argues that, if the Court identifies an MFCFP violation, the Court must also deem the NMUPA violated. See MSJ Response at 15-16 (citing N.M. Stat. Ann. § 47-15-7(A)). New Mexico also argues for its other NMUPA claims. See MSJ Response at 16-17. First, New Mexico argues that it shows a genuine issue of material fact regarding Real Estate Law's misrepresentations and that the Defendants engaged in “a pattern of dishonesty, misrepresentation, and deceit, ” and repeats that the Parwatikar Defendants engaged in a common enterprise with Real Estate Law. See MSJ Response at 16. New Mexico argues that the Defendants filed dozens of frivolous lawsuits, most of which they voluntarily dismissed, and that this pattern suggests knowing misrepresentation of their services as valuable -- not frivolous or sham -- legal services, which constitutes a knowing violation of the NMUPA. See MSJ Response at 16. New Mexico cites as evidence of the lawsuits' frivolousness Judge Real's $126, 400.00 sanction against Real Estate Law and his statement in Alexander v. Wells Fargo Bank: “‘[t]he amount of this sanction is appropriate in light of the frivolous nature of the Complaint, the blatant misjoinder of Plaintiffs, and Plaintiffs' Counsel's voluntary dismissal of the case to avoid an adverse ruling.'” MSJ Response at 16 (quoting Alexander v. Wells Fargo Bank Fees Order at 5). Second, New Mexico avers: the “Defendants' practices were unconscionable in that Defendants took advantage of the lack of knowledge, ability, experience and capacity of consumers to a grossly unfair degree, with practices that were in gross disproportion between the value received and the price paid.” MSJ Response at 16 (citing N.M. Stat. Ann. § 57-12-2(E)). New Mexico cites the 2017 In re Davis Stipulation as evidence to support this claim. See MSJ Response at 16-17. Third, New Mexico discusses the evidence showing Real Estate Law's representations about resolving foreclosure concerns, and argues that Real Estate Law's representations were misrepresentations, because Real Estate Law did not provide foreclosure defense. See MSJ Response at 17. New Mexico cites the Foreclosure Defense Checklist, see Germain Email and FDD Package at 2, that requests foreclosure defense materials and states that the materials will help in Madrid's foreclosure defense. See MSJ Response at 17. New Mexico summarizes that Real Estate Law asked Madrid for financial documents and for his summons for his foreclosure, and transmitted to him FDD Package, which Real Estate Law described was designed to postpone the foreclosure sale. See MS J Response at 17 (citing Email from Tutu Gill to Larry Madrid (sent November 26, 2012), filed May 10, 2019 (Doc. 137-5)(“Gill Email”)). New Mexico also describes that Real Estate Law repeatedly told Madrid that it would solve Madrid's foreclosure concerns and obtain for him a loan modification. See MS J Response at 17.

         3. The MSJ Reply.

         The Parwatikar Defendants begin their reply by objecting to much of New Mexico's evidence. See MSJ Reply at 1-4. The Parwatikar Defendants aver that the findings of fact from Alexander v. Wells Fargo Bank and Aghaji v. Bank of America are inadmissible hearsay, because the United States Court of Appeals for the Tenth Circuit has concluded that rule 803(8) of the Federal Rules of Evidence -- the public records exception -- does not encompass judicial factfinding. See MSJ Reply at 2 (citing Herrick v. Garvey, 298 F.3d 1184, 1191 (10th Cir. 2002)). The Parwatikar Defendants add that documents from In re Pratt, In Re Davis, and In the Matter of Adlor Virgil Clarambeau, Case No. 09-O-16588 (State Bar Ct. Cal. 2011)(“In re Clarambeau”), are inadmissible hearsay and are not within the residual exception. See MSJ Reply at 3 (citing Auguste v. Sullivan, 2009 WL 807446, at *3 (applying Herrick v. Garvey to a California disciplinary decision)). The Parwatikar Defendants add that New Mexico does not seek even to apply the State Bar of California's findings against someone involved in In re Pratt, In Re Davis, or In re Clarambeau. See MSJ Reply at 3. The Parwatikar Defendants aver that New Mexico could introduce the facts into the record through other, better evidence, than In re Pratt, In Re Davis, and In re Clarambeau. See MSJ Reply at 4.

         Regarding the purported MARS violations, the Parwatikar Defendants argue that New Mexico relies “almost exclusively on inadmissible evidence, ” which is insufficient to establish Real Estate Law's liability, a prerequisite to Mr. Parwatikar's liability. MSJ Reply at 8. Turning to the MFCFP and NMUPA claims, the Parwatikar Defendants first reiterate that New Mexico has not established a genuine dispute of material fact on the MFCFP claim's four elements or on Mr. Parwatikar's representations to New Mexico consumers concerning Real Estate Law's lawsuits. See MSJ Reply at 9. The Parwatikar Defendants repeat that New Mexico has not shown a genuine dispute of material fact whether Mr. Parwatikar “solicited, offered to, or actually performed a foreclosure ‘service,' for a single New Mexico consumer.” MSJ Reply at 9 (quoting N.M. Stat. Ann. § 47-15-22(G)).

         First addressing the MFCFP claim, the Parwatikar Defendants argue that New Mexico shows only that Mr. Parwatikar directed others' mortgage modification services “but the documents cited do not indicate those orders or directions came from Deepak Parwatikar, that any such ‘directions' or ‘orders' pertained to New Mexico consumers, or that Mr. Parwatikar solicited, offered to, or actually performed a foreclosure service for a homeowner.” MSJ Reply at 9. The Parwatikar Defendants contend that New Mexico has shown no evidence that Mr. Parwatikar communicated with the New Mexico consumers such that he made any representations making him a foreclosure consultant. See MSJ Reply at 9 (citing N.M. Stat. Ann. § 47-15-2(b)(1)(a), (g), (h)). The Parwatikar Defendants additionally argue that New Mexico has insufficient evidence that Mr. Parwatikar received compensation for foreclosure consultant services, based on the facts about Mr. Parwatikar's involvement with the fee-splitting provision and that New Mexico shows no evidence that Pinnacle Law received the $3 million from Real Estate Law or that Mr. Parwatikar knew of these payments. See MSJ Reply at 9.

         The Parwatikar Defendants contend, in relation to the alleged NMUPA violation, that New Mexico does not produce evidence of Mr. Parwatikar making misrepresentations to New Mexico consumers. See MSJ Reply at 10. The Parwatikar Defendants aver that New Mexico relies on evidence of other attorneys' misconduct to prove Mr. Parwatikar's liability, but that this evidence cannot be used to show such liability. See MSJ Reply at 10. Moreover, the Parwatikar Defendants add that, even if this evidence involved Mr. Parwatikar, evidence of past violations cannot be used to show his liability here. See MSJ Reply at 10. The Parwatikar Defendants aver that New Mexico describes Mr. Parwatikar as engaged in a “common enterprise” with Real Estate Law, but that New Mexico does not indicate where it finds such language in any relevant statute or caselaw, or “address why Balanced Legal Group or Deepak Parwatikar personally should be liable in addition to Pinnacle.” MSJ Reply at 10. The Parwatikar Defendants add: “In its Response, Plaintiff does not address Mr. Parwatikar's arguments that Plaintiff has presented no sound basis for the Court to grant injunctive relief. The Court should consequently dismiss Count IV.” MSJ Reply at 10 (citing MSJ at 8-9).

         4. The Joinder.

         In the Joinder, Mr. Pratt joins the MSJ. See Joinder at 1. Mr. Pratt incorporates his arguments from the Notice of Motion, Motion to Dismiss for Improper Venue and/or In the Alternative Transfer to Los Angeles; Dec. of Pratt, filed March 14, 2019 (Doc. 113)(“Motion for Change of Venue”), into the Joinder.[37] See Joinder at 2.[38] Mr. Pratt emphasizes that the attorney- client fee agreements provide, for disputes arising under the agreements, for venue in Los Angeles County, California, and the application of California law.[39] See Joinder at 2.

         5. The Joinder Response.

         New Mexico responds. See Joinder Response at 1-2. New Mexico argues that Mr. Pratt untimely filed his Joinder, see Joinder Response at 1, because, according to New Mexico, Mr. Pratt filed the Joinder after the April 25, 2019, deadline for filing pretrial motions. See Joinder Response at 1. New Mexico asks that the Court deny, accordingly, the requests in the Joinder and, in the alternative, incorporates its MSJ Response into the Joinder Response. See Joinder Response at 1-2.[40]

         6. The Marked Exhibits Filings.

         On May 24, 2019, New Mexico filed its exhibits with the relevant pages marked for the Court's reference, pursuant to D.N.M. LR-Civ 10.6. See Marked Exhibits Notice at 1. New Mexico explains that, “[p]ursuant to the local rules, ” it files “the exhibits including only the relevant pages and marked for reference.” Marked Exhibits Notice ¶ 2, at 1. The Parwatikar Defendants object to the Marked Exhibits. See Marked Exhibits Objections at 1-2. The Parwatikar Defendants state that New Mexico filed the Marked Exhibits, “apparently changing all the exhibits cited in its Response to the MSJ. It gave no explanation for this change except that it was ‘pursuant to the local rules.'” Marked Exhibits Objections at 2 (quoting Marked Exhibits ¶ 2, at 1). The Parwatikar Defendants state that the Marked Exhibits Notice is untimely. See Marked Exhibits Objections at 1-2.[41]

         4.The Hearing.

         The Parwatikar Defendants began their summary judgment arguments by explaining that Mr. Parwatikar, Balanced Legal, and Pinnacle Law together bring the MSJ. See Draft Transcript of Hearing at 9:25-10:2 (taken May 28, 2019)(Harrison)(“Tr.”). The Parwatikar Defendants then argued that, to show that Real Estate Law violated the MARS Rule by accepting advance fees, New Mexico must show first that Real Estate Law accepted fees for mortgage assistance relief services, [42] and not for litigation services, which New Mexico has not done. See Tr. At 10:5-17 (Harrison). The Parwatikar Defendants added that New Mexico must show that Mr. Parwatikar, Balanced Legal, or Pinnacle Law substantially assisted the MARS Rule violation and knew of the violation, and that New Mexico cannot establish those elements. See Tr. at 10:17-25 (Harrison). Mr. Pratt joined the Parwatikar Defendants' arguments. See Tr. at 11:7-10 (Pratt).

         The Court turned to New Mexico. See Tr. at 11:11-13 (Court, Anaya-Allen). New Mexico first noted that the Marked Exhibits are the same as the exhibits attached to the MSJ Response, other than the marking of relevant exhibit portions. See Tr. at 11:15-12:8 (Anaya-Allen). New Mexico then explained that “it seems undisputed . . . that Real Estate Law Center acted in violation of the MARS rule, that the provision of so-called litigation services by attorneys who are not licensed to practice in the State of New Mexico, which is an exception to the MARS rule, did not take place.” Tr. at 12:11-15 (Anaya-Allen).[43] New Mexico averred that a genuine question of material fact exists “whether or not the services that were actually being provided by Real Estate Law Center were mortgage modification or relief services, the same mortgage assistance services that were prohibited by the MARS rule and for which up front payments were required.” Tr. at 12:19-23 (Anaya-Allen). New Mexico noted that the parties do not dispute whether the payments to Real Estate Law were advance fees. See Tr. at 12:23-25 (Anaya-Allen). New Mexico directed the Court to Alexander v. Wells Fargo Bank, Aghaji v. Bank of America, and Armstrong v. Nationstar as evidence that Real Estate Law did not engage in genuine litigation services, but filed frivolous lawsuits to conceal its mortgage assistance relief services, and added that the Court can consider this evidence without violating the hearsay prohibition, because the cases reflect legal conclusions about the lawsuits' frivolousness and not findings of fact. See Tr. at 13:1-14:7 (Anaya-Allen). New Mexico argues that, because the lawsuits were frivolous, a genuine dispute exists whether Real Estate Law engaged in actual litigation or used the litigation as a façade for mortgage modification services. See Tr. at 14:7-14 (Anaya-Allen).

         New Mexico noted that the MARS Rule has a provision for substantial assistance and support, and averred:

[I]f Mr. Parwatikar is not found to actually have been involved [directly in] the provision of these illegal services by Real Estate Law Center, we would suggest that there is at a minimum a genuine issue of material fact as to whether or not Mr. Parwatikar was providing substantial assistance and support.

Tr. at 14:19-15:2 (Anaya-Allen). New Mexico suggested that Real Estate Law's $3 million payments to Mr. Parwatikar and Pinnacle Law alone establish a genuine issue of material fact on this issue. See Tr. at 15:2-15 (Anaya-Allen).

         The Court asked New Mexico what facts a factfinder would need to determine in this case, see Tr. at 15:18-21 (Court), and New Mexico responded, listing

whether or not Real Estate Law Center was, in fact, a mortgage assistance relief provider, whether or not Real Estate Law Center received advance fees, whether Mr. Parwatikar provides . . . substantial assistance and support to Real Estate Law Center, or whether, . . . Mr. Parwatikar . . . was actually a principal of Real Estate Law Center utilizing his consulting agreement essentially as cover to protect himself. The question is also raised with respect to the substantial assistance and support provision, which is in the code of federal regulations, 12 CFR [§] 1015.6 . . . whether he knew or consciously avoided knowing that the provider, RELC, was engaged in any act or practice that violates the rule.

Tr. at 15:24-16:11 (Anaya-Allen). New Mexico added that a genuine issue of material fact exists regarding Mr. Parwatikar's knowledge, given that Minn. v. Balanced Legal & Parwatikar addressed Balanced Legal and Mr. Parwatikar's mortgage modification services, and argued that Minn. v. Balanced Legal & Parwatikar evidences Parwatikar's “knowledge of the MARS rule and knowledge of the prohibitions” before this case's events. Tr. at 16:24-25 (Anaya-Allen). See id. at 16:14-25 (Anaya-Allen). The Court asked for Minn. v. Balanced Legal & Parwatikar's date, see Tr. at 17:1 (Court), and New Mexico stated 2010, before Real Estate Law's 2011 founding, see Tr. at 17:2-5 (Anaya-Allen).

         Mr. Pratt had no reply to New Mexico, see Tr. at 17:12-13 (Pratt), but the Parwatikar Defendants argued that the parties dispute whether Real Estate Law accepted advance payments for mortgage assistance relief services, see Tr. at 17:29-22 (Harrison). The Parwatikar Defendants averred that Real Estate Law's advance fees were for litigation services, and not for mortgage assistance relief services. See Tr. at 18:3-6 (Harrison); id. at 18:15-21 (Harrison). The Court stated that asking for a large retainer fee -- as Real Estate Law did -- is unusual where the law firm also requires a contingency fee. See Tr. at 18:22-19:1 (Court). The Parwatikar Defendants replied that they cannot opine on Real Estate Law's motivation for drafting the attorney-client fee agreements as it did, because Mr. Parwatikar was not involved in drafting the documents. See Tr. at 19:2-6 (Harrison). The Parwatikar Defendants averred that New Mexico has not produced evidence on the purposes for Real Estate Law's retainer provision or evidence showing Real Estate Law's purported mortgage assistance relief services or that the consumer payments were for mortgage assistance relief services. See Tr. at 19:2-18 (Harrison).

         The Court asked whether litigation services could be mortgage assistance relief services. See Tr. at 19:19-22 (Court). The Parwatikar Defendants averred that mortgage assistance relief services do not include ligation services, and explained that, in their view, the MARS Rule advance fee prohibition exists, because an entity should not accept payment for a service before completing the service, but noted that such policy concerns do not apply in the litigation services context. See Tr. at 19:23-20:12 (Harrison). The Court asked the Parwatikar Defendants to define mortgage assistance relief services. See Tr. at 20:13-16 (Court). The Parwatikar Defendants responded:

I will try to do that, Your Honor. I think that mortgage loan relief, or loan modification, is, and this will not [be] a technical definition, so forgive me, but it is the reduction or alteration, maybe even the forgiveness of a loan that [is] made between the debtor, the owner of the home, and some servicer or some bank, and it is the alteration of that loan, the modification of it, that is typically, obviously, to reduce it, that is described in [§] 1015.5. That's my reading, Your Honor. I think that typically in these cases when you have a debtor that goes through the loan modification process, it is a negotiation with the bank in order to reduce the payments that they have to make, or in order to forgive a past default there. It is basically a financing, that is my understanding, Your Honor. . . . I don't want to say that it could never overlap with litigation, but I think in this case, it has not been demonstrated that it has. And the loan modification services that are described in the regulations are not litigation.

Tr. at 20:17-21:10 (Harrison). The Court persisted in this line of questioning, asking whether the MARS Rule mentions litigation services. See Tr. at 21:11-14 (Court). The Parwatikar Defendants responded that the MARS Rule does not explicitly exclude litigation services, but that the attorney exemption suggests that mortgage assistance relief services do not include litigation services, “because it doesn't really make sense that there would be an exception for lawyers providing these services if, in fact, litigation . . . overlaps with, or is subsumed by these regulations.” Tr. at 21:20- 23 (Harrison). See id at 21:15-23 (Harrison). The Court asked whether the Parwatikar Defendants came within the MARS Rule attorney exemption, and the Parwatikar Defendants conceded that Mr. Parwatikar was not licensed in New Mexico. See Tr. at 21:24-22:2 (Court, Harrison). The Court returned to debating the MARS Rule's interpretation and inquired why the regulation would not cover a tool in the lawyer's arsenal -- litigation. See Tr. at 22:3-9 (Court). The Parwatikar Defendants responded:

I think because as I mentioned, Your Honor, . . . advance fee payments are impermissible under this regulation[. Y]ou're asking people who are typically already in debt or in default to pay up front for the promise of reducing their payments, or getting them forgiveness of their default, and that is the reason why it is prohibited. Providing other litigation services, it is just not clear to me that that even falls under the regulation because it is not . . . necessarily directly impacting your loan. Whether or not it is part of what an attorney could do in helping a debtor seems to me to be a different question, and that's not the violation that's been alleged here.

Tr. at 22:10-23 (Harrison).

         The Court then asked the Parwatikar Defendants if they contend that the retainer and the contingency fee were for litigation services. See Tr. at 23:7-11 (Court). The Parwatikar Defendants responded that Mr. Parwatikar was not aware of the advance fee provision and that the evidence does not establish how much Real Estate Law received in monthly maintenance fees. See Tr. at 23:12-19 (Harrison). The Parwatikar Defendants explained that, although the contracts require payment of $5, 000.00, the evidence does not show what the New Mexico or other consumers paid. See Tr. at 23:20-24:5 (Court, Harrison). The Court asked whether the payment issue raised a genuine issue of material fact, and the Parwatikar Defendants responded that the payment issue does not create such an issue, because the advance fees are not unreasonable, and because New Mexico, and not the Parwatikar Defendants, must provide evidence of the fees' payment, which New Mexico had not done. See Tr. at 24:10-19 (Harrison). The Court suggested that the Court and the parties did not know what purpose the $5, 000.00 fee served. See Tr. at 25:3-8 (Court). The Parwatikar Defendants averred that, on the attorney-client fee agreement's face, the attorney-client fee agreement is an agreement for litigation services and that, to survive summary judgment, New Mexico must show that the attorney-client fee agreement served another purpose. See Tr. at 25:9-18 (Harrison).

         The Parwatikar Defendant then moved to the MFCFP issue. See Tr. at 25:19-21 (Court, Harrison). The Parwatikar Defendants averred that the MFCFP does not apply to the Parwatikar Defendants, because the MFCFP requires communication with New Mexico consumers and New Mexico has presented no evidence that the Parwatikar Defendants communicated with New Mexico consumers.[44] See Tr. at 25:21-26:4 (Harrison). The Parwatikar Defendants averred that Mr. Parwatikar was not a foreclosure consultant for MFCFP purposes, so he could not violate the statute. See Tr. at 26:4-9 (Harrison). The Parwatikar Defendants contended that, because the MFCFP does not apply to business consulting services, such as law firms provide, and because, for the statute's purposes, law firms are not “owners, ” the Parwatikar Defendants are not “foreclosure consultants” for the MFCFP's purposes.[45] Tr. at 26:5-15 (Harrison). The Parwatikar Defendants contended that New Mexico argues that the Parwatikar Defendants are in a “common enterprise with Real Estate Law, ” but that the Parwatikar Defendants cannot locate such “common enterprise” language in the statues or caselaw relevant to this case. Tr. at 26:15-20 (Harrison). The Parwatikar Defendants added that they do not see why, if Real Estate Law is a foreclosure consultant, and the Parwatikar Defendants assisted it or Real Estate Law employed them, New Mexico named them and not simply Real Estate Law as Defendants. See Tr. at 26:20-27:2 (Harrison).

         The Court responded that the MFCFP's foreclosure consultant definition is “incredibly broad.” Tr. at 27:9 (Court). See id at 27:8-15 (Court). The Court added that the MFCFP applies to an offer to a homeowner for services and that it did not see how an entity could enter a contract without making an offer of services. See Tr. at 27:23-28:1 (Court). The Parwatikar Defendants responded that, although the MFCFP is broad, New Mexico's authority is limited to the services provided to New Mexico consumers, and the Parwatikar Defendants did not receive compensation from or communicate with these New Mexico consumers and New Mexico shows no sufficient nexus between them and New Mexico consumers to satisfy the MFCFP. See Tr. at 28:11-29:8 (Harrison). Mr. Pratt briefly added that New Mexico also has not shown that he communicated with New Mexico consumers, and noted: “The wording of this statute says a foreclosure consultant stops a foreclosure. That's very specific, Your Honor. There is no evidence that any of the New Mexico residents were in foreclosure. They just wanted to sue their bank. And that's all I did.” Tr. at 29:18-22 (Pratt).

         New Mexico responded that it objects to Pratt untimely joining the MSJ. See Tr. at 30:2-7 (Anaya-Allen). New Mexico then argued that the MFCFP is broad, that “owner” means the owner of the home being foreclosed, and, given “the breadth of this particular statute, [‘]a person who directly or indirectly makes a solicitation or offer['] would suggest that Mr. Parwatikar, as well as the other defendants, are certainly within the ambit of that definition.” Tr. at 30:18-21 (Anaya-Allen). See id at 30:2-21 (Anaya-Allen). New Mexico explained that Real Estate Law directly solicited New Mexico consumers, offering aid with mortgage and foreclosure concerns, and directed the Court to the Madrid Decl. for evidence of such solicitations. See Tr. at 30:21-12 (Anaya-Allen). New Mexico described that the Madrid Decl. reflects Real Estate Law's activities that violated the MFCFP. See Tr. at 31:12-32:16 (Anaya-Allen). New Mexico also indicated that FDD Package documents reference Balanced Legal, which raises a genuine issue of material fact about Mr. Parwatikar, Balanced Legal's, and Pinnacle Law's relationships with Real Estate Law. See Tr. at 32:16-33:5 (Anaya-Allen). New Mexico suggested that the $3 million payments from Real Estate Law to Mr. Parwatikar suggest that he filled more than a business consultant role with Real Estate Law. See Tr. at 33:4-9 (Anaya-Allen). New Mexico also directed the Court to the Murphy Decl. for evidence of Mr. Parwatikar's role with Real Estate Law and argued that, although Mr. Parwatikar maintains that he consulted for Real Estate Law, he received considerable compensation from the firm. See Tr. at 33:17-34:25 (Anaya-Allen). New Mexico argued that the question whether Mr. Parwatikar was directly or indirectly involved with Real Estate Law cannot be determined on summary judgment, and that, given the evidence, he might have been either directly or indirectly involved with Real Estate Law's activities. See Tr. at 34:25-35:5 (Anaya-Allen). According to New Mexico, Mr. Parwatikar claims to have been a consultant with Real Estate Law but could produce a consulting agreement dated only from 2013 and not from earlier. See Tr. at 35:5-16 (Anaya-Allen).

         Pratt responded: “I would submit on what I stated, there is no evidence that I directly communicated with any New Mexico residents. All I did was litigation, and that's all I ever did for them.” Tr. at 36:6-9 (Pratt). The Parwatikar Defendants responded to New Mexico that New Mexico's contentions speak to Real Estate Law's role as a mortgage foreclosure consultant, and not to Mr. Parwatikar's direct or indirect communication with New Mexico consumers. See Tr. at 36:12-19 (Harrison). The Court asked the Parwatikar Defendants whether the $3 million from Real Estate Law suggests that Mr. Parwatikar had indirect communication with the New Mexico consumers. See Tr. at 36:20-37:2 (Court). The Parwatikar Defendants replied that the MFCFP does not require personal contact but repeated that, as evidence of Mr. Parwatikar's and Pinnacle Law's involvement with the New Mexico consumers, New Mexico has produced only the attorney-client fee agreement. See Tr. at 37:3-12 (Harrison). The Court asked whether the Email from Deepak Parwatikar to Susan Murphy at 1 (sent May 9, 2012), filed May 10, 2019 (Doc. 137-2)(“May 9 Email”), the Feb. 13 Email, the Email from Deepak Parwatikar to Susan Murphy at 1 (sent February 14, 2013), filed May 10, 2019 (Doc. 137-2)(“Feb. 14 Email”), and the April 5 Email indicate Mr. Parwatikar's close involvement with Real Estate Law. See Tr. at 37:13-18 (Court). The Parwatikar Defendants replied that Mr. Parwatikar performed consultant work for Real Estate Law and that he did not himself perform the tasks listed in the April 5 Email. See Tr. at 37:19-38:4 (Harrison). The Court asked the Parwatikar Defendants to clarify their theory of the Parwatikar Defendants' role with Real Estate Law. See Tr. at 38:5-18 (Court). According to the Parwatikar Defendants, Mr. Parwatikar provided human resource consulting for Real Estate Law and disclaims any involvement in Real Estate Law's litigation services. See Tr. at 39:8-40:3 (Harrison); id at 40:23-41:7 (Harrison).

         The Court asked the Parwatikar Defendants whether collateral estoppel made irrelevant their hearsay arguments regarding Alexander v. Wells Fargo Bank, Aghaji v. Bank of America, Armstrong v. Nationstar, In re Pratt, and In re Davis. See Tr. at 41:8-15 (Court). The Parwatikar Defendants responded that collateral estoppel does not apply, because Mr. Parwatikar did not litigate the matters and had no opportunity to respond to the disciplinary hearings. See Tr. at 41:16-25 (Harrison). The Court asked about collateral estoppel in relation to Alexander v. Wells Fargo and Minn. v. Balanced Legal & Parwatikar, to which, respectively, Real Estate Law, and Mr. Parwatikar and Balanced Legal, are parties. See Tr. at 42:1-2 (Court); id. at 42:7-10 (Court). The Parwatikar Defendants responded that the Defendants cannot be conflated. See Tr. at 42:11-13 (Harrison). The Parwatikar Defendants explained that the Court has entered default judgments against Real Estate Law and Davis, so the Parwatikar Defendants cannot opine to the representation provided in any lawsuit involving Real Estate Law and Mr. Davis. See Tr. at 42:24-43:4 (Harrison). The Parwatikar Defendants then explained that Minn. v. Balanced Legal & Parwatikar did not have factual findings involving Real Estate Law, did not involve New Mexico consumers, and may have been resolved on a stipulation. See Tr. at 43:6-9 (Harrison); id. at 43:13-14 (Harrison); id. at 43:18-19 (Harrison); id. at 43:22-44:2 (Harrison). The Parwatikar Defendants explained that, while they are unsure whether Minnesota, Mr. Parwatikar, and Balanced Legal stipulated to a judgment in Minn. v. Balanced Legal & Parwatikar, admitting evidence of Minn. v. Balanced Legal & Parwatikar encounters problems under rule 404(b) of the Federal Rules of Evidence, because Minn. v. Balanced Legal & Parwatikar suggests Mr. Parwatikar's involvement in prohibited activities. See Tr. at 43:22-44:9 (Harrison). The Court asked whether such evidence of Minn. v. Balanced Legal & Parwatikar comes into the record for good faith and scienter purposes, see Tr. at 44:10-14 (Court), but the Parwatikar Defendants argued that rule 404(b) prohibits the evidence and New Mexico did not provide notice of a legitimate purpose for the evidence, see Tr. at 44:15-18 (Harrison). The Parwatikar Defendants explained that Mr. Parwatikar could testify whether Minn. v. Balanced Legal & Parwatikar alerted him to the MARS Rule and that introducing other evidence of Minn. v. Balanced Legal & Parwatikar piles on evidence for prejudicial purposes. See Tr. at 45:6-25:12 (Harrison). The Parwatikar Defendants also emphasized that the MFCFP applies only to the New Mexico consumers. See Tr. at 45:15-46:3 (Harrison).

         The Parwatikar Defendants then moved to the NMUPA arguments. See Tr. at 46:7-9 (Court, Harrison).[46] The Parwatikar Defendants averred that the NMUPA claim is limited to representations to and lawsuits on behalf of the New Mexico consumers, and reiterated their arguments about the lack of evidence of Mr. Parwatikar's communications with New Mexico consumers. See Tr. at 46:9-14 (Harrison). According to the Parwatikar Defendants, New Mexico has not shown evidence of communications between Mr. Parwatikar and the New Mexico consumers, and Mr. Parwatikar had even less involvement with the lawsuits than he had communication with the New Mexico consumers. See Tr. at 46:9-47:15 (Harrison). The Parwatikar Defendants added that they object on hearsay grounds and on 403 grounds to much of New Mexico's evidence about Mr. Davis and/or Real Estate Law. See Tr. at 47:18-48:4 (Harrison). The Court asked the Parwatikar Defendants why the Germain Email and FDD Package at 7, 8 names Balanced Legal Group. See Tr. at 48:5-13 (Court). The Parwatikar Defendants responded that the record is unclear why the forms contain that name and explained that, although New Mexico suggests that Real Estate Law obtained the forms from Balanced Legal, Balanced Legal was not in the business of practicing during the time Real Estate Law used the forms. See Tr. at 48:14-25 (Harrison).

         The Court turned to New Mexico for its NMUPA arguments. See Tr. at 49:17-20 (Court). New Mexico averred that Mr. Parwatikar argues his non-involvement with Real Estate Law's mass joinder lawsuits, but acknowledges in the Parwatikar Depo. that he was aware of the lawsuits. See Tr. at 49:21-50:1 (Anaya-Allen). The Court interjected to ask New Mexico's theory of Mr. Parwatikar and Real Estate Law's relationship. See Tr. at 50:2-6 (Court). New Mexico explained:

Well, our theory is after getting dinged by the Minnesota Attorney General, Mr. Parwatikar decided to set up a model that he felt would provide him with cover from similar type of charges. So he set up RELC. He was involved in the origin[al] [in]corporation of RELC. There was discussion of that at his deposition. He acknowledged that he was, quote unquote, I guess, hired or consulted by . . . [Clarambeau] in the incorporation of RELC, and that he acted in that incorporation process as the agent for RELC. Again, Mr. Parwatikar tries to be very hands off. He is just acting at the behest of a client. I mean, he doesn't . . . produce any documents that support any of his positions. He just denies without actually being able to provide anything that corroborates his position with respect to that. That after, you know, RELC was incorporated, set up by Mr. Parwatikar . . . through his law firm, he stated that he participated in the corporation of RELC. He took the [model] that he had been using with Balanced Legal Group in Minnesota and transferred it to California with Real Estate Law Center, which is indicated by these forms from Balanced Legal Group that were being used by Real Estate Law Center . . . . I mean, there is a lot more evidence, Your Honor, that we have on this point that's not part of this motion that's been in front of the Court.

Tr. at 50:7-51:6 (Anaya-Allen). New Mexico also directed the Court to the 2017 In re Davis Stipulation for evidence of Real Estate Law's activities, and argued that, because Davis stipulated to the facts in the 2017 In re Davis Stipulation, the statements are admissions admission and not hearsay. See Tr. at 51:4-23 (Anaya-Allen). The Court asked into which hearsay exception New Mexico would fit the statements, and New Mexico identified rule 801(d)(2) of the Federal Rules of Evidence -- opposing party's statements. See Tr. at 51:2452:2. The Court advised that Davis will not be a party at trial. See Tr. at 52:3-4. New Mexico then cited the catchall provision of the Federal Rules of Evidence's rule 807, but the Court stated that it would likely not use that provision. See Tr. at 52:9-14 (Anaya-Allen, Court). New Mexico then explained why it believed that rule 803(8) applies, differentiating this case from Herrick v. Garvey, and arguing that, here, unlike in Herrick v. Garvey, the trial is a bench trial, so the Tenth Circuit's concerns about a jury giving disproportionate weight to judicial findings are irrelevant. See Tr. at 52:15-53:12 (Anaya-Allen). The Court indicated its doubt that the 2017 In re Davis Stipulation fits the rule 803(8) exception, because records of Real Estate Law's activities are records of private matters and a stipulation is likely not a matter observed in an investigation or while under a legal duty to report. See Tr. at 53:18-54:5 (Court). New Mexico offered that a state bar disciplinary hearing should be considered a legally authorized investigation. See Tr. at 54:10-22 (Anaya-Allen).

         New Mexico argued that Real Estate Law uniformly dismissed its lawsuits, because the lawsuits were a “mechanism that was being used to obtain loan modifications for the consumers.” Tr. at 55:6-7 (Anaya-Allen). See id. at 54:22-55:7 (Anaya-Allen). New Mexico suggested that the conclusions of frivolousness in Alexander v. Wells Fargo Bank and Aghaji v. Bank of America are not findings of fact, but conclusions of law, and should have “some collateral estoppel effect, ” Tr. at 56:10 (Anaya-Allen). See Tr. at 56:1-10 (Anaya-Allen). New Mexico averred that the Murphy Decl. and the May 9 Email, the Feb. 13 Email, the Feb. 14 Email, and the April 5 Email evidence Mr. Parwatikar's involvement. See Tr. at 56:11-18 (Anaya-Allen).

         The Parwatikar Defendants responded. See Tr. at 57:6-8 (Court, Harrison). They first indicated that, if the 2016 In re Davis Stipulation and the 2017 In re Davis Stipulation are not judicial findings of fact, rule 803(8) does not except the stipulations from hearsay, and that, even if 2016 In re Davis Stipulation and the 2017 In re Davis Stipulation are judicial findings of fact, in Herrick v. Garvey, the Tenth Circuit concluded that rule 803(8) does not apply to judicial bodies' findings of facts. See Tr. at 57:8-21 (Harrison). The Parwatikar Defendants added that, if 2016 In re Davis Stipulation and 2017 In re Davis Stipulation contain only Mr. Davis' stipulations, rule 801(d)(2) would not apply, because Mr. Davis is not a party opponent. See Tr. at 57:17-58:4 (Harrison). The Parwatikar Defendants added, regarding rule 807, that nothing indicates that Davis' stipulations provide the best evidence through which to introduce facts about Real Estate Law. See Tr. at 58:4-10 (Harrison).

         The Court asked whether New Mexico has other evidence to support its position on the NMUPA, and the Parwatikar Defendants replied that New Mexico has not established much of its evidence's admissibility. See Tr. at 58:17-59:3 (Court, Harrison). The Parwatikar Defendants agreed, however, with the Court that the Murphy Decl. and the attached emails from Mr. Parwatikar are admissible. See Tr. at 59:4-12 (Court, Harrison); id. at 59:13-21 (Court, Harrison). The Parwatikar Defendants described the question before the Court as whether, without the inadmissible evidence, New Mexico raised a genuine issue of material fact on the NMUPA claim. See Tr. at 59:21-60:1 (Harrison). The Court asked who, if not the Parwatikar Defendants, performed legal work at Real Estate Law, and the Parwatikar Defendants replied that Real Estate Law had attorneys. See Tr. at 60:2-15 (Court, Harrison). The Court asked for further information regarding through whom the Real Estate Law provided legal services, and the Parwatikar Defendants explained that Mr. Pratt owned and was the lead attorney for Real Estate Law from 2011 to 2013, that Davis owned and was the lead attorney for Real Estate Law from 2013 to 2016, and that Real Estate Law employed its own attorneys, who performed its legal work. See Tr. at 60:19-61:6 (Harrison). The Court asked the Parwatikar Defendants about Mr. Parwatikar's references to clients in the Feb. 14 Email, and the Parwatikar Defendants responded that the clients to which Mr. Parwatikar referred were not Mr. Parwatikar's personal clients, but Real Estate Law's clients, and that Mr. Parwatikar and Pinnacle Law provided business and human resources consulting services and rental services to Real Estate Law. See Tr. at 61:7-62:7 (Court, Harrison). The Court pressed that Mr. Parwatikar appeared to manage Real Estate Law's activities, but the Parwatikar Defendants explained that, although human resource management and litigation management overlap, Mr. Parwatikar was not involved in Real Estate Law's litigation services. See Tr. at 62:8-63:18 (Court, Harrison).

         The Court and the parties turned to the injunctive relief arguments. See Tr. at 63:25-64:6 (Harrison, Court). The Parwatikar Defendants averred that New Mexico has not shown any ongoing actions to enjoin. See Tr. at 64:6-14 (Harrison). New Mexico agreed that no evidence shows that the prohibited activities are ongoing, but stated that it did not intend to waive its injunctive relief requests and that it sought such relief to prevent the Defendants' activities from proceeding in the future. See Tr. at 64:20-65:10 (Anaya-Allen). The Parwatikar Defendants responded that injunctive relief is inappropriate when it is speculative and has no end date. See Tr. at 65:15-21 (Harrison).

         Regarding the Marked Exhibits Notice, the Parwatikar Defendants added that they objected to the Marked Exhibits Notice as untimely. See Tr. at 66:1-11 (Harrison). The Court asked if timeliness was the Parwatikar Defendants' sole objection to the Marked Exhibits, see Tr. at 66:12-16 (Court), and the Parwatikar Defendants responded that they had no other objections, see Tr. at 67:1-7 (Harrison). New Mexico repeated that the Marked Exhibits only differ from the MSJ Response's exhibits in that the Marked Exhibits are marked. See Tr. at 67:12-17 (Anaya-Allen). The Court concluded that it likely would not exclude the evidence for being untimely, because it welcomed New Mexico's help in having marked the exhibits. See Tr. at 66:21-23 (Court). The Court informed the parties that it would likely deny the MSJ. See Tr. at 67:23-68:23 (Court). Mr. Pratt returned at the hearing's end to the collateral estoppel issue and argued that he “cannot be punished twice for the same crime.” Tr. at 111:5 (Pratt). See id at 111:1-10 (Pratt).

         LAW REGARDING MOTIONS FOR SUMMARY JUDGMENT

         Rule 56(a) states: “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “The movant bears the initial burden of ‘show[ing] that there is an absence of evidence to support the nonmoving party's case.'” Herrera v. Santa Fe Pub. Sch., 956 F.Supp.2d 1191, 1221 (D.N.M. 2013)(Browning, J.)(alteration in Herrera v. Santa Fe Pub. Sch.)(quoting Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991)). See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)(“Celotex”).

Before the court can rule on a party's motion for summary judgment, the moving party must satisfy its burden of production in one of two ways: by putting evidence into the record that affirmatively disproves an element of the nonmoving party's case, or by directing the court's attention to the fact that the non-moving party lacks evidence on an element of its claim, “since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex, 477 U.S. at 323-25. On those issues for which it bears the burden of proof at trial, the nonmovant “must go beyond the pleadings and designate specific facts to make a showing sufficient to establish the existence of an element essential to his case in order to survive summary judgment.” Cardoso v. Calbone, 490 F.3d 1194, 1197 (10th Cir. 2007).

Plustwik v. Voss of Nor. ASA, No. CIV 11-0757 DS, 2013 WL 1945082, at *1 (D. Utah May 9, 2013)(Sam, J.). “If the moving party will bear the burden of persuasion at trial, that party must support its motion with credible evidence -- using any of the materials specified in Rule 56(c) -- that would entitle it to a directed verdict if not controverted at trial.” Celotex, 477 U.S. at 331 (Brennan, J., dissenting)(emphasis in original).[47] Once the movant meets this burden, rule 56 requires the nonmoving party to designate specific facts showing that there is a genuine issue for trial. See Celotex, 477 U.S. at 324; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)(“Liberty Lobby”). Alternatively, the movant may show that the nonmoving party lacks the evidence to establish its case at trial, and the nonmovant will have the burden of showing that it can produce sufficient evidence to establish the essential elements of its case. See Celotex, 477 U.S. at 323-25 (providing that summary judgment is proper where a plaintiff lacks evidence on an essential element of its case); Morales v. E.D. Entyre & Co., 382 F.Supp.2d 1252, 1272 (D.N.M. 2005)(Browning, J.)(granting summary judgment because plaintiff lacked competent evidence that defendants defectively manufactured an oil distributor); 11 James Wm. Moore et al., Moore's Federal Practice § 56.40[1][b][iv], at 56-109 to -111 (3d ed. 2018). In American Mechanical Solutions, LLC v. Northland Process Piping, Inc., 184 F.Supp.3d 1030 (D.N.M. 2016)(Browning, J.), the Court confronted such a situation in which the movant did not offer evidence disproving the nonmovant's allegations, but, rather, argued, under the second option in Celotex, that the nonmovant lacked evidence to establish an element of its claim. See 184 F.Supp.3d at 1075. The Court granted summary judgment for the movant, because the nonmovant -- the plaintiff -- did not offer expert evidence supporting causation or proximate causation for its breach-of-contract or breach-of-the-implied-warranty-of-merchantability claims as New Mexico law requires to establish a prima facie case for those elements. See 184 F.Supp.3d at 1075.

         The party opposing a motion for summary judgment must “set forth specific facts showing that there is a genuine issue for trial as to those dispositive matters for which it carries the burden of proof.” Applied Genetics Int'l Inc. v. First Affiliated Sec, Inc., 912 F.2d 1238, 1241 (10th Cir. 1990). See Vitkus v. Beatrice Co., 11 F.3d 1535, 1539 (10th Cir. 1993)(“‘However, the nonmoving party may not rest on its pleadings but must set forth specific facts showing that there is a genuine issue for trial as to those dispositive matters for which it carries the burden of proof” (quoting Applied Genetics Int'l, Inc. v. First Affiliated Secs., Inc., 912 F.2d at 1241)). Rule 56(c)(1) provides: “A party asserting that a fact . . . is genuinely disputed must support the assertion by . . . citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed.R.Civ.P. 56(c)(1). It is not enough for the party opposing a properly supported motion for summary judgment to “rest on mere allegations or denials of his pleadings.” Liberty Lobby, 477 U.S. at 256. See Abercrombie v. City of Catoosa, 896 F.2d 1228, 1231 (10th Cir. 1990); Otteson v. United States, 622 F.2d 516, 519 (10th Cir. 1980)(“‘[O]nce a properly supported summary judgment motion is made, the opposing party may not rest on the allegations contained in his complaint, but must respond with specific facts showing the existence of a genuine factual issue to be tried.'” quoting Coleman v. Darden, 595 F.2d, 533, 536 (10th Cir. 1979)). A party may not “avoid summary judgment by repeating conclusory opinions, allegations unsupported by specific facts, or speculation.” Colony Nat'l Ins. v. Omer, No. CIV 07-2123 JAR, 2008 WL 2309005, at *1 (D. Kan. June 2, 2008)(Robinson, J.)(citing Fed.R.Civ.P. 56(e); Argo v. Blue Cross & Blue Shield of Kan., Inc., 452 F.3d 1193, 1199 (10th Cir. 2006)). “In responding to a motion for summary judgment, ‘a party cannot rest on ignorance of facts, on speculation, or on suspicion and may not escape summary judgment in the mere hope that something will turn up at trial.'” Colony Nat'l Ins. v. Omer, 2008 WL 2309005, at *1 (quoting Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988)).

         To deny a motion for summary judgment, genuine factual issues must exist that “can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Liberty Lobby, 477 U.S. at 250. A mere “scintilla” of evidence will not avoid summary judgment. Vitkus v. Beatrice Co., 11 F.3d at 1539 (citing Liberty Lobby, 477 U.S. at 248). Rather, there must be sufficient evidence on which the fact finder could reasonably find for the nonmoving party. See Liberty Lobby, 477 U.S. at 251 (citing Vitkus v. Beatrice Co., 11 F.3d at 1539; Schuylkill & Dauphin Improvement Co. v. Munson, 81 U.S. (14 Wall.) 442, 448 (1871)). “[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable . . . or is not significantly probative, . . . summary judgment may be granted.” Liberty Lobby, 477 U.S. at 249 (citations omitted)(citing First Nat. Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 290 (1968); Dombrowski v. Eastland, 387 U.S. 82, 87 (1967)). Where a rational trier of fact, considering the whole record, cannot find for the nonmoving party, there is no genuine issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         When reviewing a motion for summary judgment, the court should keep in mind certain principles. First, the court's role is not to weigh the evidence, but to assess the threshold issue whether a genuine issue exists as to material facts requiring a trial. See Liberty Lobby, 477 U.S. at 249. Second, the ultimate standard of proof is relevant for purposes of ruling on a summary judgment, such that, when ruling on a summary judgment motion, the court must “bear in mind the actual quantum and quality of proof necessary to support liability.” Liberty Lobby, 477 U.S. at 254. Third, the court must resolve all reasonable inferences and doubts in the nonmoving party's favor, and construe all evidence in the light most favorable to the nonmoving party. See Liberty Lobby, 477 U.S. at 255 (“The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.”); Hunt v. Cromartie, 526 U.S. 541, 550-55 (1999). Fourth, the court cannot decide any issues of credibility. See Liberty Lobby, 477 U.S. at 255.

         There are, however, limited circumstances in which the court may disregard a party's version of the facts. This doctrine developed most robustly in the qualified immunity arena. In Scott v. Harris, 550 U.S. 372 (2007), the Supreme Court of the United States concluded that summary judgment is appropriate where video evidence “quite clearly contradicted” the plaintiffs version of the facts. 550 U.S. at 378-81. The Supreme Court explained:

At the summary judgment stage, facts must be viewed in the light most favorable to the nonmoving party only if there is a “genuine” dispute as to those facts. Fed. Rule Civ. Proc. 56(c). As we have emphasized, “[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus[.] Co. v. Zenith Radio Corp., 475 U.S. [at] 586-587 . . . (footnote omitted). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. [at] 247-248 . . . . When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment.
That was the case here with regard to the factual issue whether respondent was driving in such fashion as to endanger human life. Respondent's version of events is so utterly discredited by the record that no reasonable jury could have believed him. The Court of Appeals should not have relied on such visible fiction; it should have viewed the facts in the light depicted by the videotape.

Scott v. Harris, 550 U.S. at 380-81 (emphasis in original).

         The Tenth Circuit applied this doctrine in Thomson v. Salt Lake County, 584 F.3d 1304 (10th Cir. 2009), and explained:

[B]ecause at summary judgment we are beyond the pleading phase of the litigation, a plaintiff's version of the facts must find support in the record: more specifically, “as with any motion for summary judgment, when opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts.” York v. City of Las Cruces, 523 F.3d 1205, 1210 (10th Cir. 2008)(quoting Scott[ v. Harris], 550 U.S. at 380); see also Estate of Larsen ex rel. Sturdivan v. Murr, 511 F.3d 1255, 1258 (10th Cir. 2008).

Thomson v. Salt Lake Cty., 584 F.3d at 1312 (brackets from Thomson v. Salt Lake Cty. omitted). “The Tenth Circuit, in Rhoads v. Miller, 352 Fed.Appx. 289 [, 291 (10th Cir. 2009)(unpublished), [48]. . . explained that the blatant contradictions of the record must be supported by more than other witnesses' testimony[.]” Lymon v. Aramark Corp., 728 F.Supp.2d 1222, 1249 (D.N.M. 2010)(Browning, J.), aff'd, 499 Fed.Appx. 771 (10th Cir. 2012)(unpublished).

         LAW REGARDING DIVERSITY JURISDICTION AND INTERPRETING STATE LAW

         Under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1983)(“Erie”), a federal district court sitting in diversity jurisdiction, and when applying state law under federal question jurisdiction, applies “state law with the objective of obtaining the result that would be reached in state court.” Butt v. Bank of Am., N.A., 477 F.3d 1171, 1179 (10th Cir. 2007). Accord Mem. Hosp. v. Healthcare Realty Tr. Inc., 509 F.3d 1225, 1229 (10th Cir. 2007). The Court has held that if a district court cannot find a Supreme Court of New Mexico “opinion that [governs] a particular area of substantive law . . . [the district court] must . . . predict how the Supreme Court of New Mexico would [rule].” Guidance Endodontics, LLC v. Dentsply Int'l., Inc., 708 F.Supp.2d 1209, 1224-25 (D.N.M. 2010)(Browning, J.). “Just as a court engaging in statutory interpretation must always begin with the statute's text, a court formulating an Erie prediction should look first to the words of the state supreme court.” Peña v. Greffet, 110 F.Supp.3d 1103, 1132 (D.N.M. 2015)(Browning, J.).[49] If the Court finds only an opinion from the Court of Appeals of New Mexico, while “certainly [the Court] may and will consider the Court of Appeal[s'] decision in making its determination, the Court is not bound by the Court of Appeal[s'] decision in the same way that it would be bound by a Supreme Court decision.” Mosley v. Titus, 762 F.Supp.2d 1298, 1332 (D.N.M. 2010)(Browning, J.)(noting that, where the only opinion on point is “from the Court of Appeals, . . . the Court's task, as a federal district court sitting in this district, is to predict what the Supreme Court of New Mexico would do if the case were presented to it” (citing Wade v. EMCASCO Ins., 483 F.3d 657, 666 (10th Cir. 2007)(explaining that, “[w]here no controlling state decision exists, the federal court must attempt to predict what the state's highest court would do” and that, “[i]n doing so, it may seek guidance from decisions rendered by lower courts in the relevant state”))).[50] The Court may also rely on Tenth Circuit decisions interpreting New Mexico law. See Anderson Living Tr. v. WPX Energy Prod., LLC, 27 F.Supp.3d 1188, 1243 & n.30 (D.N.M. 2014)(Browning, J.).[51] Ultimately, “the Court's task is to predict what the state supreme court would do.” Wade v. EMCASCO Ins., 483 F.3d at 666. Accord Mosley v. Titus, 762 F.Supp.2d at 1332.

         LAW REGARDING THE FINALITY OF STATE COURT JUDGMENTS IN FEDERAL COURT

         Res judicata and collateral estoppel are common-law doctrines of finality, which serve to relieve parties of the costs and vexation of multiple lawsuits, conserve judicial resources, and prevent inconsistent decisions. See Allen v. McCurry, 449 U.S. 90, 94 (1980). Pursuant to res judicata, “[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981)(citing Comm'r v. Sunnen, 333 U.S. 591, 597 (1948)). Collateral estoppel precludes re-litigation of a common issue of law or fact which was necessarily decided in a prior court's final judgment. See Allen v. McCurry, 449 U.S. at 94. In determining whether a doctrine of finality applies, a decision from a state court has the same preclusive effect in federal court as the decision would have in a subsequent state court action. See Reed v. McKune, 298 F.3d 946, 949-50 (10th Cir. 2002)(citing 28 U.S.C. § 1738 (“[The] judicial proceedings of any court of any such State . . . shall have the same full faith and credit in every court within the United States . . . as they would by law or usage in the courts of such . . . from which they are taken.”)). A district court in the Tenth Circuit applying res judicata or collateral estoppel to a decision from a state court must look to the laws of that state to determine the required elements for either doctrine to preclude a claim or issue brought in federal court. See Reed v. McKune, 298 F.3d at 949 (“‘In determining whether a state court judgment precludes a subsequent action in federal court, we must . . . giv[e] it the same preclusive effect as would the courts of the state issuing the judgment.'” (quoting Rhodes v. Hannigan, 12 F.3d 989, 991 (10th Cir. 1993))). Thus, if a state law in state court would preclude re-litigation of a claim or an issue of law or fact, the same claim or issue is precluded in federal court. See Reed v. McKune, 298 F.3d at 949-51 (applying Kansas law to determine whether collateral estoppel precludes an issue of fact or law in a federal court action containing § 1983 claims). Cf Mayer v. Bernalillo Cty., No. CIV 18-0666 JB\SCY, 2019 WL 130580, at *36-43 (D.N.M. Jan. 8, 2019)(Browning, J.)(applying New Mexico law to determine the preclusive effects of a New Mexico state court proceeding); Martinez v. Martinez, No. CIV 09-0281 JB/LFG, 2013 WL 3270448, at *28-29 (D.N.M. June 3, 2013)(Browning, J.)(applying New Mexico preclusion law to determine the preclusive effect of a New Mexico divorce); Braverman v. New Mexico, No. CIV 11-0829 JB/WDS, 2012 WL 5378290, at *28-30 (D.N.M. Sept. 26, 2012)(Browning, J.)(applying New Mexico law to determine the preclusive effect of a New Mexico state court judgment).

         LAW REGARDING HEARSAY

         “Hearsay testimony is generally inadmissible.” United States v. Christy, No. CR 10-1534 JB, 2011 WL 5223024, at *5 (D.N.M. Sept. 21, 2011)(Browning, J.)(citing Fed.R.Evid. 802). Rule 801(c) of the Federal Rules of Evidence defines hearsay: “a statement that: (1) the declarant does not make while testifying at the current trial or hearing; and (2) a party offers in evidence to prove the truth of the matter asserted in the statement.” Fed.R.Evid. 801(c). Courts deem hearsay generally unreliable and untrustworthy. See Chambers v. Mississippi, 410 U.S. 284, 298 (1973)(noting that hearsay is generally untrustworthy and lacks traditional indicia of reliability); United States v. Lozado, 776 F.3d 1119, 1121 (10th Cir. 2015)(“Hearsay is generally inadmissible as evidence because it is considered unreliable.” (citing Williamson v. United States, 512 U.S. 594, 598 (1994))); United States v. Console, 13 F.3d 641, 656 (3d. Cir. 1993)(stating hearsay is '"inherently untrustworthy'” because of the lack of an oath, presence in court, and cross examination quoting United States v. Pelullo, 964 F.2d 193, 203 (3rd Cir. 1992))). Testimonial proof is necessarily based upon the human senses, which can be unreliable. See 5 Jack Weinstein & Margaret Berger, Weinstein's Federal Evidence § 802.02[1][b], at 802-5 (Joseph McLaughlin ed., 2d ed. 2017)(“Weinstein's Federal Evidence”). The Anglo-American tradition uses three devices to illuminate inaccuracies in the testimonial proof: (i) the oath; (ii) personal presence at trial; (iii) and cross examination. See Weinstein's Federal Evidence § 802.02[2][a], at 802-5. Courts view hearsay evidence as unreliable because it is not subject to an oath, personal presence in court, or cross examination, see, e.g., United States v. Console, 13 F.3d at 656; it is difficult to evaluate the credibility of out-of-court statements when the three safeguards mentioned above are unavailable, see Weinstein's Federal Evidence § 802.02[3], at 802-6 to -7.

         “Hearsay within hearsay” is admissible only “if each part of the combined statements conforms with an exception to the rule.” Fed.R.Evid. 805. See, e.g., United States v. DeLeon, 316 F.Supp.3d 1303, 1306 (D.N.M. 2018)(Browning, J.)(noting, after concluding that rule 803(8) provides an exception for law enforcement reports, that a hearsay issue remains regarding the statements within the reports); Wood v. Millar, No. CIV 13-0923 RB/CG, 2015 WL 12661926, at *4 (D.N.M. Feb. 19, 2015)(Brack, J.)(stating that witness statements in police reports, to which rule 803(8) applies, may be admissible under hearsay exclusions other than rule 803(8)); Montoya v. Sheldon, No. CIV 10-0360 JB/WDS, 2012 WL 6632524, at *7 (D.N.M. Oct. 31, 2012)(Browning, J.)(excluding medical records, which themselves were inadmissible hearsay, although the statements within the medical records were opposing party statements). A statement that is otherwise hearsay, however, may be admissible for a purpose, such as impeachment, other than to prove the truth of the matter asserted. See United States v. Caraway, 534 F.3d 1290, 1299 (10th Cir. 2008)(“We have already explained why the content of the statement, if used substantively, would be inadmissible hearsay. If admitted for impeachment purposes, however, it is not hearsay.”). Likewise, “‘[i]f the significance of an offered statement lies solely in the fact that it was made, no issue is raised as to the truth of anything asserted, and the statement is not hearsay.'” Echo Acceptance Corp. v. Household Retail Servs., Inc., 267 F.3d 1068, 1087 (10th Cir. 2001)(quoting Fed.R.Evid. 801 advisory committee's note). Statements in the latter category include verbal acts --

“statement[s] offered to prove the words themselves because of their legal effect (e.g., the terms of a will).” Black's Law Dictionary (10th ed. 2014). “A contract, for example, is a form of verbal act to which the law attaches duties and liabilities and therefore is not hearsay.” Mueller v. Abdnor, 972 F.2d 931, 937 (8th Cir. 1992). See also Cagle v. The James St. Grp., 400 Fed.Appx. 348');">400 Fed.Appx. 348, 356 (10th Cir. 2010).

Farley v. Stacy, No. 14-CV-0008-JHP-PJC, 2015 WL 3866836, at *5 (N.D. Okla. June 23, 2015)(Payne, J.), aff'd, 645 Fed.Appx. 684');">645 Fed.Appx. 684 (10th Cir. 2016)(unpublished).

         1. Rule 801(d)(2).

         An opposing party's statement is not hearsay. See Fed.R.Evid. 801(d)(2). Rule 801(d)(2) specifically excludes from hearsay a statement that is offered against an opposing party and:

(A) was made by the party in an individual or representative capacity;
(B) is one the party manifested that it adopted or believed to be true;
(C) was made by a person whom the party authorized to make a statement on the subject;
(D) was made by the party's agent or employee on a matter within the scope of that relationship and while it existed; or
(E) was made by the party's coconspirator during and in furtherance of the conspiracy.
The statement must be considered but does not by itself establish the declarant's authority under (C); the existence or scope of the relationship under (D); or the existence of the conspiracy or participation in it under (E).

         Fed. R. Evid. 801(d)(2). “The admissibility of opposing-party statements ‘is not based on reliability; rather, they are admitted as part of the adversary system'; they are admitted, in short, because the party said the words and should be stuck with them, regardless of their accuracy.” United States v. Ballou, 59 F.Supp.3d 1038, 1074 (D.N.M. 2014)(Browning, J.)(quoting Stephen A. Saltzburg et. al, Federal Rules of Evidence Manual § 801.02[b], at 801-13 (2011)). “[T]he Tenth Circuit has stated that proponents of such evidence ‘need only show by a preponderance of the evidence that the opposing party had made the statement.'” United States v. Shirley, No. CR 15-1285 JB, 2016 WL 9021832, at *7 (D.N.M. Dec. 21, 2016)(Browning, J.)(citing United States v. Brinson, 772 F.3d 1314, 1320 (10th Cir. 2014)).

         “Rule 801(d)(2)(A) does not . . . permit such a statement to be used against anyone other than the party who made the statement, such as codefendants.” United States v. DeLeon, 287 F.Supp.3d 1187, 1256 (D.N.M. 2018)(Browning, J.)(citing United States v. Wolf 839 F.2d 1387, 1393 & n.4 (10th Cir. 1988); Stephen A. Saltzburg, et al., Federal Rules of Evidence Manual § 801.02[6][c] (11th ed. 2017)). Statements made during closing argument by an attorney qualify as an admission by a party opponent under rule 801(d)(2)(A). See United States v. Ganadonegro, 854 F.Supp.2d 1088, 1121 & 1121 n.11 (D.N.M. 2012)(Browning, J.)(citing United States v. McElhiney, 85 Fed.Appx. 112, 115 (10th Cir. 2003)(unpublished)). The Court has determined that rule 806 of the Federal Rules of Evidence, which permits attacking hearsay statements with “any evidence that would be admissible for those purposes if the declarant had testified as a witness, ” Fed.R.Evid. 806, “does not apply to rule 801(d)(2)(A) statements, ” United States v. DeLeon, No. CR 15-4268 JB, 2018 WL 878121, at *2 n.1 (D.N.M. Feb. 12, 2018)(Browning, J.). “Party opponents can, however, impeach their own admissions, i.e., rule 801(d)(2)(A) statements, even though rule 806 does not apply. If a party opponent admission is relevant, then anything that impeaches such a statement is also relevant.” United States v. DeLeon, 2018 WL 878121, at *2 n.1.

         2. Rule 803(3).

         Rule 803(3) permits the introduction of “hearsay . . ., even though the declarant is available as a witness, ” for a statement of the declarant's “[t]hen existing mental, emotional, or physical condition”:

A statement of the declarant's then existing state of mind, emotion, sensation, or physical condition (such as intent, plan, motive, design, mental feeling, pain, and bodily health), but not including a statement of memory or belief to prove the fact remembered or believed unless it relates to the execution, revocation, identification, or terms of declarant's will.

         Fed. R. Evid. 803(3). For the statement to qualify under the exception, it “must relate to the declarant's state of mind during” the incident in question. United States v. Netschi, 511 Fed.Appx. 58, 61 (2d Cir. 2013)(“‘To admit statements of one's state of mind with regard to conduct that occurred . . . earlier as in this case would significantly erode the intended breadth of this hearsay exception.'” (quoting United States v. Cardascia, 951 F.2d 474, 488 (2d Cir. 1991))). This requirement is not to say that the statement must be said at the very moment of the incident, but for intent to be proved, it must be “contemporaneous” to the act. Mut. Life Ins. of N.Y. v. Hillmon, 145 U.S. 285, 295 (1892). To be contemporaneous and therefore admissible under the present- state-of-mind exception, a statement must be “part of a continuous mental process.” United States v. Cardascia, 951 F.2d at 488. In addition to the requirements that the statement be contemporaneous to the incident at hand and relevant to the issues of the case, it must also be established that there was no opportunity for the declarant to “‘fabricate or to misrepresent his thoughts.'” United States v. Jackson, 780 F.2d 1305, 1315 (7th Cir. 1986)quoting United States v. Layton, 549 F.Supp. 903, 909 (N.D. Cal. 1982)(Peckham, J.)). The statements of intent must reveal information or details about the future, as opposed to statements of memory, or statements looking to the past. See Shepard v. United States, 290 U.S. 96, 104 (1933). “The most obvious risk of prejudice” from such statements “is that the jury will consider the hearsay statement not as proof of state of mind and the subsequent conduct of the declarant, but rather for the truth of the facts that are related in the statement.” Saltzburg, supra, § 803.02, at 4-803 (11th ed. 2017).

         3. Rule 803(8).

         Rule 803(8) provides a hearsay exception for public records. See Fed.R.Evid. 803(8). It excepts from the hearsay prohibition:

A record or statement of a public office if:
(A) it sets out:
(i) the office's activities;
(ii) a matter observed while under a legal duty to report, but not including, in a criminal case, a matter observed by law-enforcement personnel; or
(iii) in a civil case or against the government in a criminal case, factual findings from a legally authorized investigation; and
(B) the opponent does not show that the source of information or other circumstances indicate a lack of trustworthiness.

         Fed. R. Evid. 803(8). This exception does not “allow the admission of findings by courts.” Herrick v. Garvey, 298 F.3d at 1192.[52]

         4. Rule 807.

         Rule 807, the Residual Exception, provides:

Under the following circumstances, a hearsay statement is not excluded by the rule against hearsay even if the statement is not specifically covered by a hearsay exception in Rule 803 or 804:
(1) the statement has equivalent circumstantial guarantees of trustworthiness;
(2) it is offered as evidence of a material fact;
(3) it is more probative on the point for which it is offered than any other evidence that the proponent can obtain through reasonable efforts; and
(4) admitting it will best serve the purposes of these rules and the interests of justice.

         Fed. R. Evid. 807(a). This rule provides further that “the statement is admissible only if, before the trial or hearing, the proponent gives an adverse party reasonable notice of the intent to offer the statement and its particulars, including the declarant's name and address, so that the party has a fair opportunity to meet it.” Fed.R.Evid. 807(b).[53] The United States Court of Appeals for the First Circuit has summarized the policies that the residual hearsay exception serves: (i) “[t]o provide sufficient flexibility to permit the courts to deal with new and unanticipated situations”; (ii) “[t]o preserve the integrity of the specifically enumerated exceptions”; (iii) “[t]o facilitate the basic purpose of the Federal Rules of Evidence: truth ascertainment and fair adjudication of controversies.” United States v. Sposito, 106 F.3d 1042, 1048 (1st Cir. 1997)(citing 11 Moore's Federal Practice § 803(24)[7] (2d ed. 1994 & Supp. 1996-97)). These purposes are consistent with the suggestions of many of the leading evidence scholars over the past century and further rule 807's objective to make relevant evidence admissible. See United States v. Moore, 824 F.3d 620, 624 (7th Cir. 2016)(“The purpose of Rule 807 is to make sure that reliable, material hearsay evidence is admitted, regardless of whether it fits neatly into one of the exceptions enumerated in the Rules of Evidence.”).

         Given that rule 807 authorizes the admission of hearsay evidence outside the confines of a precise exception, courts interpret the residual exception to allow, in individual situations, for the admission of evidence of high probative value, but not to create new categorical exceptions. See United States v. Doe, 860 F.2d 488, 491 (1st Cir. 1988)(concluding that the residual exception criteria “involve considerations which are very trial-specific, such as the relative probative value of the hearsay statement and whether admitting the statement will best serve ‘the interests of justice'” (quoting Fed.R.Evid. 803(24))). But cf. Garner v. United States, 439 U.S. 936, 939 n.3, (1978)(Stewart, J., dissenting)(“It seems to me open to serious doubt whether [the residual exception] was intended to provide case-by-case hearsay exceptions, or rather only to permit expansion of the hearsay exceptions by categories.”). The residual hearsay exception is “meant to be reserved for exceptional cases, ” and is “not intended to confer ‘a broad license' on trial judges ‘to admit hearsay statements that do not fall within one of the other exceptions contained in rules 803 and 804(b).'” Conoco Inc., v. Dep't of Energy, 99 F.3d at 392 (quoting S. Rep. No. 94-199, at 20 (1975)). See United States v. Trujillo, 136 F.3d 1388, 1395-96 (10th Cir. 1998)(stating that, because the residual hearsay exception is intended for “exceptional circumstances, ” offerors of such evidence bear a “heavy burden” of presenting the trial court with sufficient indicia of trustworthiness). Hence, evidence admitted pursuant to rule 807 must have “circumstantial guarantees of trustworthiness” comparable to those of the rule 803 exceptions.[54] United States v. Harrison, 296 F.3d 994, 1004-07 (10th Cir. 2002)(holding that child sexual abuse victim's statement to Federal Bureau of Investigation agent had circumstantial guarantees of trustworthiness, even though victim recanted her statement, because the statement was consistent with her earlier statements and was specific, and victim was old enough to have the ability to remember the events). See United States v. Trujillo, 136 F.3d at 1395-96; United States v. Tome, 61 F.3d 1446, 1453 (10th Cir. 1995)(concluding that child's statement to caseworker identifying abuser, made a year after attack, lacked guarantees of trustworthiness); United States v. Farley, 992 F.2d 1122, 1126 (10th Cir. 1993). In United States v. Farley, for example, the Tenth Circuit admitted, pursuant to rule 807, a child sexual abuse victim's assault account, as given to victim's mother, even though some statements were made the morning after the assault, because the victim was still suffering pain and distress from the assault, the victim employed childish terminology, and the victim's youth reduced the likelihood that the statements were fabricated. See 992 F.2d at 1126.

         In determining the trustworthiness of hearsay offered under the residual exception, the Tenth Circuit considers factors such as: (i) the statement's character; (ii) whether the statement is written or oral; (iii) the parties' relationship; (iv) the declarant's probable motivation in making the statement; and (v) the circumstances under which the statement is made. See United States v. Lawrence, 405 F.3d 888, 902 (10th Cir. 2005)(concluding that statements made to FBI agents by physician at defendant's clinic, including that the physician did not believe he was legally required to be at the clinic to supervise medical work, were not admissible under rule 807, in defendant's Medicare fraud trial, because statements had no circumstantial guarantees of trustworthiness, statements were taken shortly after FBI executed search warrant on clinic, and physician was the subject of the same investigation that eventually led to charges against defendant); F.T.C. v. Kuykendall, 312 F.3d 1329, 1343 (10th Cir. 2002)(concluding that consumer declarations and complaints had sufficient circumstantial guarantees of trustworthiness to warrant admission under rule 807 in a civil contempt proceeding arising from the defendants' violation of a permanent injunction, because they were made under oath and subject to penalty of perjury). For admissibility under rule 807, a statement must be “more probative on the point for which it is offered than any other evidence that the proponent can obtain through reasonable efforts.”[55] Fed.R.Evid. 807(a)(3). See F.T.C. v. Kuykendall, 312 F.3d at 1343 (concluding that consumer declarations and complaints were trustworthy and most probative evidence available, and therefore admissible under rule 807, provided defendants had adequate notice); United States v. Zamora, 784 F.2d 1025, 1031 (10th Cir. 1986)(concluding that hearsay statements were properly excluded in absence of showing of statement's probative value or any effort to obtain information from other sources). The Tenth Circuit considers a statement “more probative” if the district court determines that the hearsay is relevant and reliable, and that no other evidence, or little other evidence, is available on the same point. See Marsee v. U.S. Tobacco Co., 866 F.2d 319, 324-25 (10th Cir. 1989)(concluding that reports were not admissible, because much of their contents were already admitted through expert testimony).

         Rule 807 requires the district court to consider the availability. through reasonable efforts. of other admissible evidence, and courts consider matters such as the importance of the evidence and the proponent's ability to provide it. See Calderon v. Presidio Valley Farmers Ass'n, 863 F.2d 384, 391 (5th Cir. 1989)(concluding that answers to interrogatories were admissible pursuant to rule 807, because relevant records were lost or destroyed, trial was held several years after violations took place, and witnesses were illiterate); United States v. Shaw, 824 F.2d 601, 610 (8th Cir. 1987)(stating that exceptional circumstances generally exist when child relates abuse details to adult). Courts must consider the need for the evidence in light of the basic assumption underlying the rule against hearsay -- that statements made directly in the courtroom are more reliable than hearsay; in other words, courts must balance need against trustworthiness. See United States v. Harrison, 296 F.3d at 1004-07. Admission of evidence under the residual exception must accord with “the purposes of these rules and the interests of justice.” Fed.R.Evid. 807(a)(4). See New England Mut. Life Ins. v. Anderson, 888 F.2d 646, 650-51 (10th Cir. 1989)(concluding that district court properly excluded statements reported in newspaper article, because district court found no guarantees of trustworthiness and plaintiff failed to show that admission of the article without opportunity to cross-examine witness would serve interests of justice).

         LAW REGARDING RULE 403 OF THE FEDERAL RULES OF EVIDENCE

         Under rule 403, “[t]he court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” Fed.R.Evid. 403. The trial court must weigh the proffered evidence's probative value against its potential for unfair prejudice. See United States v. Record, 873 F.2d 1363, 1375 (10th Cir. 1989). '"[I]t is only unfair prejudice, substantially outweighing probative value, which permits exclusion of relevant matter [under rule 403].'” United States v. Pettigrew, 468 F.3d 626, 638 (10th Cir. 2006)(emphasis in United States v. Sides, 944 F.2d 1554 (10th Cir. 1991))quoting United States v. Sides, 944 F.2d at 1563). The Tenth Circuit has admonished district courts that they should be “mindful” that “‘exclusion of evidence under Rule 403 that is otherwise admissible under the other rules is an extraordinary remedy and should be used sparingly.'” United States v. Smalls, 605 F.3d 765, 787 (10th Cir. 2010)(quoting United States v. Tan, 254 F.3d 1204, 1211 (10th Cir. 2001)).

         The decision to admit or exclude evidence pursuant to rule 403 is within the district court's discretion, see United States v. Lugo, 170 F.3d 996, 1005 (10th Cir. 1999), and the district court's discretion to balance possible unfair prejudice against probative value is broad, see United States v. Bice-Bey, 701 F.2d 1086, 1089 (4th Cir. 1983); United States v. Masters, 622 F.2d 83, 87-88 (4th Cir. 1980). The Supreme Court has noted:

In deference to a district court's familiarity with the details of the case and its greater experience in evidentiary matters, courts of appeals afford broad discretion to a district court's evidentiary rulings . . . . This is particularly true with respect to Rule 403 since it requires an “on-the-spot balancing of probative value and prejudice, potentially to exclude as unduly prejudicial some evidence that already has been found to be factually relevant.

Sprint/United Mgmt. Co. v. Mendelsohn, 552 U.S. 379, 384 (2008)(quoting 1 Steven Alan Childress & Martha S. Davis, Federal Standards of Review § 4.02, at 4-16 (3d ed. 1999)). See United States v. Abel, 469 U.S. 45, 54 (1984)(“Assessing the probative value of [proffered evidence], and weighing any factors counseling against admissibility is a matter first for the district court's sound judgment under Rules 401 and 403 . . . .”).

         Evidence may be unfairly prejudicial if it would likely provoke an emotional response from the jury or would otherwise tend to adversely affect the jury's attitude toward a particular matter. See United States v. Rodriguez, 192 F.3d 946, 951 (10th Cir. 1999). Evidence is not unfairly prejudicial merely because it damages a party's case. See United States v. Caraway, 534 F.3d at 1301; United States v. Curtis, 344 F.3d 1057, 1067 (10th Cir. 2003); United States v. Martinez, 938 F.2d 1078, 1082 (10th Cir. 1991). Rather, “[t]o be unfairly prejudicial, the evidence must have ‘an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one.'” United States v. Caraway, 534 F.3d at 1301 (quoting Fed.R.Evid. 403 advisory committee's note).

         “The term ‘unfair prejudice,' as to a criminal defendant, speaks to the capacity of some concededly relevant evidence to lure the factfinder into declaring guilt on a ground different from proof specific to the offense charged.” Old Chief v. United States, 519 U.S. 172, 180 (1997). “Such improper grounds certainly include . . . generalizing a defendant's earlier bad act into bad character and taking that as raising the odds that he did the later bad act now charged.” Old Chief v. United States, 519 U.S. at 180-81. In light of rule 404(b)'s prohibition regarding the use of character evidence to show that a person acted in conformity with their character, “[t]here is, accordingly, no question that propensity would be an ‘improper basis' for conviction and that evidence . . . is subject to analysis under Rule 403 for relative probative value and for prejudicial misuse as propensity evidence.” Old Chief v. United States, 519 U.S. at 182. The Supreme Court has advised lower courts to disregard the prosecution's need for “evidentiary depth to tell a continuous story” when the prosecution's evidence consists of the underlying facts of a criminal defendant's prior felony conviction, as in an action for felon in possession. Old Chief v. United States, 519 U.S. at 189-90. In such an action, “[t]he most the jury needs to know is that the conviction admitted by the defendant falls within the class of crimes that Congress thought should bar a convict from possessing a gun, and this point may be made readily in a defendant's admission and underscored in the court's jury instructions.” Old Chief v. United States, 519 U.S. at 190-91. The Court has previously ruled that, under the Supreme Court's decision in Old Chief v. United States, the underlying facts of a defendant's prior conviction should be excluded, even if relevant to the offense. See, e.g., United States v. Williams, No. CR 12-1675 JB, 2012 WL 5476228, at *2 (D.N.M. Nov. 7, 2012)(Browning, J.); United States v. Ashley, No. CR 04-2497 JB, 2006 WL 4109679, at *3 (D.N.M. Aug. 1, 2006)(Browning, J.)(“Even if relevant under rule 404(b), given the nature of the crime with which he is charged here and the similarity to these prior crimes, the danger of unfair prejudice outweighs the probative value of specifically identifying the prior crimes.”). See also United States v. Wacker, 72 F.3d 1453, 1472 (10th Cir. 1995)(“Whereas the fact of a defendant's prior felony conviction is material to a felon in possession charge, the nature and underlying circumstances of a defendant's conviction are not.”).

         LAW REGARDING RULE 404(b)

         Under rule 404(b), evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person to show action in conformity therewith. See Fed.R.Evid. 404(b). Rule 404(b) provides:

Other Crimes, Wrongs, or Acts.
(1) Prohibited Uses. Evidence of a crime, wrong, or other act is not admissible to prove a person's character in order to show that on a particular occasion the person acted in accordance with the character.
(2) Permitted Uses; Notice in a Criminal Case. This evidence may be admissible for another purpose, such as proving motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident. On request by a defendant in a criminal case, the prosecutor must:
(A) provide reasonable notice of the general nature of any such evidence that the prosecutor intends to offer at trial; and
(B) do so before trial -- or during trial if the court, for good cause, excuses lack of pretrial notice.

         Fed. R. Evid. 404(b). In other words, one cannot present evidence the relevance of which is based on the forbidden inference: the person did X in the past, therefore he probably has a propensity for doing X, and therefore he probably did X this time, too. The rule, however, has a number of “exceptions” - purposes for which such evidence will be admissible. Those purposes include proving motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident. See Fed.R.Evid. 404(b)(2). The Supreme Court has enunciated a four-part process to determine whether evidence is admissible under rule 404(b). See Huddleston v. United States, 485 U.S. 681, 691-92 (1988). The Tenth Circuit has consistently applied that test.

         To determine whether Rule 404(b) evidence was properly admitted we look to [a] four-part test

(1) the evidence must be offered for a proper purpose; (2) the evidence must be relevant; (3) the trial court must make a Rule 403 determination of whether the probative value of the similar acts is substantially outweighed by its potential for unfair prejudice; and (4) pursuant to Fed.R.Evid. 105, the trial court shall, upon request, instruct the jury that evidence of similar acts is to be considered only for the proper purpose for which it was admitted.

United States v. Zamora, 222 F.3d 756, 762 (10th Cir. 2000)(quoting United States v. Roberts, 185 F.3d 1125, 1141 (10th Cir. 1999)). See United States v. Higgins, 282 F.3d 1261, 1274 (10th Cir. 2002); United States v. Hardwell, 80 F.3d 1471, 1488 (10th Cir. 1996)(citing Huddleston v. United States, 485 U.S. at 691-92).

         Rule 404(b)'s prohibition finds its source in the common-law protection of the criminal defendant from risking conviction on the basis of evidence of his character. See United States v. Dudek, 560 F.2d 1288, 1296 (6th Cir. 1977); 22 Charles Alan Wright & Kenneth Graham, Federal Practice and Procedure: Evidence § 5239, at 428, 436-37 & 439 (1991). In United States v. Phillips, 599 F.2d 134 (6th Cir. 1979), the United States Court of Appeals for the Sixth Circuit noted, in addressing rule 404(b)'s precepts, that the rule addresses two main policy concerns:

(1) that the jury may convict a “bad man” who deserves to be punished not because he is guilty of the crime charged but because of his prior or subsequent misdeeds; and (2) that the jury will infer that because the accused committed other crimes he probably committed the crime charged.

United States v. Phillips, 599 F.2d at 136.

         When “bad act evidence is both relevant and admissible for a proper purpose, ‘the proponent must clearly articulate how that evidence fits into a chain of logical inferences, no link of which may be the inference that the defendant has the propensity to commit the crime charged.'” United States v. Morley, 199 F.3d 129, 133 (3d Cir. 1999)(quoting United States v. Himelwright 42 F.3d 777, 782 (3d Cir. 1994)). The Tenth Circuit has also stated that district courts must “identify specifically the permissible purpose for which such evidence is offered and the inferences to be drawn therefrom.” United States v. Youts, 229 F.3d 1312, 1317 (10th Cir. 2000)(Seymour, C.J.)(citing United States v. Kendall 766 F.2d 1426, 1436 (10th Cir. 1985)). “[A] broad statement merely invoking or restating Rule 404(b) will not suffice.” United States v. Kendall 766 F.2d at 1436.

         The Tenth Circuit has recognized the probative value of uncharged, unrelated acts to show motive, intent and knowledge, whether the acts involved previous conduct or conduct subsequent to the charged offense if the uncharged acts are similar to the charged crime and sufficiently close in time. See United States v. Olivo, 80 F.3d 1466, 1468-69 (10th Cir. 1996)(finding the district court did not abuse its discretion when it admitted evidence about an event over one year after a defendant's arrest); United States v. Bonnett 877 F.2d 1450, 1461 (10th Cir. 1989)(holding that evidence about events over a year after the charged conduct was not “too remote in time and unrelated to the transactions with which [the defendant] was charged”). This similarity may be shown through “physical similarity of the acts or through the ‘defendant's indulging himself in the same state of mind in the perpetration of both the extrinsic offense and charged offenses.'” United States v. Queen, 132 F.3d 991, 996 (4th Cir. 1997)(quoting United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978)). See United States v. Bonnett 877 F.2d at 1461 (“The closeness in time and the similarity in conduct [are] matters left to the trial court, and [its] decision will not be reversed absent a showing of abuse of discretion.”). The more similar the act or state of mind, the more relevant the evidence becomes. See United States v. Queen, 132 F.3d at 996. Moreover, when establishing identity, although the uncharged crime must be similar to the charged offense if it is unrelated to the charged offense, it need not be identical. See United States v. Gutierrez, 696 F.2d 753, 755 (10th Cir. 1982). Accord United States v. Ganadonegro, No. CR 09-0312 JB, 2011 WL 3957549, at *1-3 (D.N.M. Aug. 30, 2011)(Browning, J.).

         RELEVANT LAW REGARDING THE MARS RULE

         Following the 2008 financial crisis, Congress created the Consumer Financial Protection Bureau (“CFPB”) and vested it with authority to enforce several laws previously within the FTC's domain. See Consumer Fin. Prot. Bureau v. Mortgage Law Grp., LLP, 157 F.Supp.3d 813, 816-17 (W.D. Wis. 2016)(Crabb, J.). Among these laws was the “Omnibus Appropriations Act of 2009, Pub. L. No. 111-8, § 626, 123 Stat. 524 (March 11, 2009), which directed the Federal Trade Commission to issue rules related to mortgage loans.” Consumer Fin. Prot. Bureau v. Mortgage Law Grp, LLP, 157 F.Supp.3d at 817. The FTC enacted the MARS Rule shortly before oversight over the Omnibus Appropriations Act of 2009 transferred to the CFPB, and the CFPB republished the MARS Rule, with the same prohibitions and attorney exemptions extant under the FTC's MARS Rule, at 12 C.F.R § 1015. See Consumer Fin. Prot. Bureau v. The Mortgage Law Grp., LLP, 157 F.Supp.3d at 817-18; Mortgage Assistance Relief Services, 75 Fed. Reg. 75092 (Dec. 1, 2010); 16 C.F.R § 322.1 (“The rules formerly at 16 CFR part 322 have been republished by the Consumer Financial Protection Bureau at 12 CFR part 1015, ‘Mortgage Assistance Relief Services (Regulation O).'”).

         In enacting the MARS Rule, the FTC acted on concerns that arose in the 2008 crisis' aftermath about mortgage relief practices and mortgage relief providers. See Mortgage Assistance Relief Services, 75 Fed. Reg. 10707, 10708-13 (March 9, 2010).

. . . [H]istoric levels of consumer debt, increased unemployment, and a stagnant housing market have contributed to high rates of mortgage loan delinquency and foreclosure. As a result, many consumers struggling to make their mortgage payments are in search of ways to avoid foreclosure. . . . Because loan modifications allow consumers to stay in their homes and reduce their overall debt, this possible solution often has great appeal to consumers. The Commission's law enforcement actions suggest that loan modifications may currently be the most frequently marketed and sold mortgage assistance relief service.

75 Fed. Reg. at 10708-09 (footnotes omitted). The FTC directed the MARS Rule toward misrepresentations and advance-fee schemes involving loan modification services:

MARS providers often misrepresent the services that they will perform and the results they will obtain for consumers. Indeed, providers frequently fail to perform even the most basic of promised services. As a result, consumers not only lose the thousands of dollars they pay to the providers, but may also lose their homes.
Typically, MARS providers initiate contact with prospective customers through Internet, radio, television, or direct mail advertising. The ads instruct consumers to call a toll-free telephone number or e-mail the company. . . . Providers typically also represent that there is high likelihood, and in some instances a “guarantee, ” of success. Despite these promises of extremely high success rates, the vast majority of consumers do not receive the promised results.
Even if the services of MARS providers could deliver the promised results, many providers do not provide even the most basic services they claimed they would perform. After collecting their up-front fees, MARS providers often fail to make initial contact with the lender or servicer for months, if at all.
In addition, some MARS providers make the specific claim that they offer legal services, when, in fact, no attorneys are employed at the company or, even if there are, they do little or no legal work for consumers. . . . [A] growing number of attorneys themselves are engaged in deceptive and unfair practices in the marketing and sale of MARS.

75 Fed. Reg. at 10710-12 (footnotes omitted).

         1. The Advance Fee Prohibition.

         Pursuant to the MARS Rule, an entity cannot accept fees in advance for mortgage assistance relief services. See 12 C.F.R. § 1015.5. The regulation states:

It is a violation of this rule for any mortgage assistance relief service provider to:
(a) Request or receive payment of any fee or other consideration until the consumer has executed a written agreement between the consumer and the consumer's dwelling loan holder or servicer incorporating the offer of mortgage assistance relief the provider obtained from the consumer's dwelling loan holder or servicer;

12 C.F.R. § 1015.5.

         The MARS Rule defines mortgage assistance relief services and mortgage assistance relief provider broadly. See 12 C.F.R.§ 1015.2. The regulation turns the definition of “mortgage assistance relief services” on the service's purported purpose and not on the service's characteristics; the operative phrase in the definition is “is represented, expressly or by implication, to assist or attempt to assist the consumer.” 12 C.F.R. § 1015.2. In full, the rule states:

Mortgage Assistance Relief Service means any service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following:
(1) Stopping, preventing, or postponing any mortgage or deed of trust foreclosure sale for the consumer's dwelling, any repossession of the consumer's dwelling, or otherwise saving the consumer's dwelling from foreclosure or repossession;
(2) Negotiating, obtaining, or arranging a modification of any term of a dwelling loan, including a reduction in the amount of interest, principal balance, monthly payments, or fees;
(3) Obtaining any forbearance or modification in the timing of payments from any dwelling loan holder or servicer on any dwelling loan;
(4) Negotiating, obtaining, or arranging any extension of the period of time within which the consumer may:
(i) Cure his or her default on a dwelling loan,
(ii) Reinstate his or her dwelling loan,
(iii) Redeem a dwelling, or
(iv) Exercise any right to reinstate a dwelling loan or redeem a dwelling;
(5) Obtaining any waiver of an acceleration clause or balloon payment contained in any promissory note or contract secured by any dwelling; or
(6) Negotiating, obtaining or arranging:
(i) A short sale of a dwelling,
(ii) A deed-in-lieu of foreclosure, or
(iii) Any other disposition of a dwelling other than a sale to a third party who is not the dwelling loan holder.

12 C.F.R. § 1015.2. A “mortgage assistance relief service provider” comes within the regulation either by providing or by offering to provide such services. 12 C.F.R. § 1015.2. For the MARS Rule's purposes, a “mortgage assistance relief service provider” is

any person that provides, offers to provide, or arranges for others to provide, any mortgage assistance relief service. . . . Person means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity, except to the extent that any person is specifically excluded from the Federal Trade Commission's jurisdiction pursuant to 15 U.S.C. 44[56] and 45(a)(2).[57]

12 C.F.R. § 1015.2.

         The MARS Rule contains two exemptions for attorney conduct. See 12 C.F.R. § 1015.7. An attorney is exempt from all MARS Rule prohibitions other than § 1015.5 where the attorney:

(1) Provides mortgage assistance relief services as part of the practice of law;
(2) Is licensed to practice law in the state in which the consumer for whom the attorney is providing mortgage assistance relief services resides or in which the consumer's dwelling is located; and
(3) Complies with state laws and regulations that cover the same type of conduct the rule requires.

12 C.F.R. § 1015.7(a). An attorney who meets the above requirements “is also exempt from § 1015.5 if the attorney: (1) Deposits any funds received from the consumer prior to performing legal services in a client trust account; and (2) Complies with all state laws and regulations, including licensing regulations, applicable to client trust accounts.” 12 C.F.R. § 1015.7(b).[58]

         Mortgage assistance relief services encompass legal, including litigation, services, when the attorneys providing such services do not meet the regulation's attorney exemptions. See 12 C.F.R. § 1015.7; F.T.C. v. Kutzner, No. SA CV 16-00999-BRO (AFMx), 2017 WL 4685286, at *2, *8-9 (C.D. Cal. Sept. 5, 2017)(O'Connell, J.)(recognizing that the MARS Rule applies to attorneys and applying the MARS rule to litigation services); F.T.C. v. A to Z Mktg., Inc., No. SACV 13-00919-DOC (RNBx), 2014 WL 12479617, at *4 (C.D. Cal. Sept. 17, 2014)(Carter, J.)(recognizing that attorneys are exempt from the MARS Rule when they satisfy the MARS Rule's attorney exemptions). Cf. F.T.C. v. Lanier Law, LLC, 194 F.Supp.3d 1238, 1282-83 (M.D. Fla. 2016)(Howard, J.)(concluding that, through the MARS Rule, the CFPB appropriately exercises regulatory authority over “attorneys engaged in the practice of law”). In enacting the MARS Rule, the FTC recognized that the attorney exemptions would cover some, but not all, legal and litigation services, and sought to prohibit certain attorney actions:

Such a narrowly-tailored exemption seeks to strike a balance that would protect consumers from unfair or deceptive conduct by attorneys who are engaged or otherwise involved in the practice of selling MARS, while at the same time preserve the ability of attorneys to provide bona fide legal services to homeowners.
If an attorney is not licensed to practice in the state, there is no reason the proposed Rule should not apply to the attorney's activities to the same extent as any other MARS provider. If an attorney is licensed to practice in a state, the attorney would be exempt under the proposed Rule only if he or she complies with state law, including state bar rules. Several commenters advocated the inclusion of such a requirement to protect consumers from unfair and deceptive conduct of attorneys that would violate state ethics and other rules governing attorneys. For example, a frequent characteristic of MARS attorneys engaged in deception is that ...

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