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

United States District Court, D. New Mexico

July 11, 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 Angelica Anaya-Allen Lisa Giandomenico Assistant Attorneys General of the State of New Mexico State of New Mexico Office of the Attorney General Albuquerque, New Mexico Attorneys for the Plaintiff

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

          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, P.C., 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 Motion Limine #1 of Chad T-W Pratt, Sr. to Exclude Undisclosed Evidence, filed June 24, 2019 (Doc. 160)(“Undisclosed Evidence MIL”); (ii) the Motion Limine #2 of Chad T-W Pratt, Sr. to Allow Practice of Law, filed June 24, 2019 (Doc. 161)(“Practice of Law MIL”); (iii) the Motion Limine #3 of Chad T-W Pratt, Sr. to Exclude State Bar, filed June 24, 2019 (Doc. 162)(“State Bar MIL”); and (iv) Plaintiff State of New Mexico's requests in the Plaintiff s Response to Motion Limine #3 of Chad T-W Pratt, Sr. to Exclude State Bar, filed July 1, 2019 (Doc. 174)(“State Bar MIL Response”). The Court held a hearing on July 2, 2019. See Clerk's Minutes at 1, filed July 2, 2019 (Doc. 184). The primary issues are: (i) whether the Court should, pursuant to rule 37(c)(1) of the Federal Rules of Civil Procedure, [1] exclude from trial evidence related to New Mexico consumers Robert Alexander, Jose Cedeno, Martha Leary, Larry Madrid, Creighten Maness, Mike Maness, Rachel Silva, Vicki Sullivan, Lloyd Trujillo, Valerie Trujillo, and Linda Ward (the “listed New Mexico consumers”), because New Mexico did not disclose these listed New Mexico consumers' “mortgage information and facts, foreclosure judgments, ” Undisclosed Evidence MIL at 3, documents reflecting alleged Mortgage Assistance Relief Services (“MARS”) Rule, 12 C.F.R. § 1015, violations related to these listed New Mexico consumers, or any evidence of Madrid and M. Maness;[2] (ii) whether the Court should, pursuant to the Due Process Clause of the Fifth Amendment to the Constitution of the United States of America, and “per the authority vested in the [State of] California legislature and California state bar, ” Practice of Law MIL at 1, exclude from trial testimony “that the practice of law by [Defendant Chad T.] PRATT was illegal, wrong, [sic] at any time or times, ” Practice of Law MIL at 2 (capitalization in Practice of Law MIL); (iii) whether the Court should, pursuant to rules 404, 405, and/or 608 of the Federal Rules of Evidence bar “testimony, inquiry, or admission, ” State Bar MIL at 3, into and of In re Pratt -- In the Matter of Chad Thomas Pratt, Nos. 13-O-12312, 13-O-12367, 13-O-12757 (State Bar Ct. Cal. Sept. 18, 2014), affd, No. S222942 (Cal. Jan. 29, 2015); and (iv) whether the Court should permit such In re Pratt evidence pursuant to rule 406 of the Federal Rules of Evidence or rule 404(b)(2) for, respectively, evidence of Real Estate Law's habit and Mr. Pratt's state of mind. The Court denies the Undisclosed Evidence MIL, denies the Practice of Law MIL, grants in part and denies in part the State Bar MIL, and denies New Mexico's requests in the State Bar MIL Response. The Court concludes that, first, New Mexico disclosed to Mr. Pratt all relevant evidence pertaining to the listed New Mexico consumers and that, as the evidence to which Mr. Pratt refers in the Undisclosed Evidence MIL is irrelevant, the Court should deny the Undisclosed Evidence MIL without prejudice to Mr. Pratt raising specific, detailed objections in the robust context of specific evidence offered at trial should New Mexico introduce such evidence at trial. Second, no right to practice law bars evidence of Mr. Pratt's lawsuits. Third, New Mexico cannot use In re Pratt to argue that Mr. Pratt has a propensity to engage in misconduct, but New Mexico can use In re Pratt for rule 608 purposes. Fourth, New Mexico may not use In re Pratt as evidence of habit pursuant to rule 406, because New Mexico does not have evidence of a sufficient number of incidents during which Real Estate Law acted pursuant to the habit. Fifth, as, in the Memorandum Opinion and Order, 2019 WL 2804575, filed July 2, 2019 (Doc. 183)(“MOO”), the Court grants summary judgment for Mr. Pratt on theories that he acted recklessly, knowingly, willfully, or in bad faith, see MOO at 184, 2019 WL 2804575, at *68, evidence of Mr. Pratt's state of mind is irrelevant and the In re Pratt evidence is inadmissible as evidence for that purpose.

         FACTUAL BACKGROUND

         The Court takes its facts from the Complaint for Violations of the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act[, N.M. Stat. Ann. §§ 47-15-1 to -8 (“MFCFPA”)], Mortgage Assistance Relief Services (MARS) Rule, the New Mexico Unfair Practices Act[, §§ 57-12-1 to -26 (“NMUPA”), ] and Petition for Injunctive Relief, filed February 22, 2017 (Doc. 1)(“Complaint”). The Court provides these facts for background. It does not adopt them as the truth, and it recognizes that these facts are largely New Mexico's version of events.

         This action arises from the activities of Defendants Real Estate Law Center, PC; Erikson M. Davis;[3] Deepak S. Parwatikar; Balanced Legal Group; and Pinnacle Law Center, P.C., and Mr. Pratt. See Complaint ¶¶ 9-15, at 4-5. Davis, Mr. Pratt, and Mr. Parwatikar are residents of the State of California, and Mr. Pratt and Mr. Parwatikar are attorneys licensed in the State of California. See Complaint ¶¶ 10-12, at 4-5. Davis has been disbarred in California. See Erikson McDonnel Davis #197841, The State Bar of California, http://members.calbar.ca.gov/fal/Licensee/Detail/197841 (last visited June 22, 2019). Neither Davis nor Mr. Pratt is licensed to practice law in New Mexico. See Complaint ¶¶ 10-11, at 4-5. Real Estate Law and Pinnacle Law are “Professional Corporation[s] registered in California.” Complaint ¶¶ 9, 13 at 4-5. Balanced Legal “is a California law firm owned and/or managed by Parwatikar.” Complaint ¶ 14, at 5.

         Mr. Pratt owned and managed Real Estate Law from September, 2011, to September, 2013. See Complaint ¶ 37, at 8. Davis “assumed ownership of Real Estate Law in 2013. Complaint ¶ 20, at 6. Real Estate Law “has an operating agreement or partnership agreement with Parwatikar and Pinnacle, ” which Mr. Parwatikar owns, Complaint ¶ 38, at 8; see id. ¶ 21, at 6, and Real Estate Law pays Pinnacle Law eighty percent of the fees that Real Estate Law receives, see Complaint ¶ 21, at 6. Balanced Legal “uses” the same address -- 695 S. Vermont Ave., Los Angeles, California 90010 -- as Real Estate Law and Pinnacle Law use. Complaint ¶ 34, at 8.

         Real Estate Law provides “legal representation, mortgage foreclosure consulting and mortgage modification services to homeowners in New Mexico although RELC RELC and its attorneys are not licensed to practice law in New Mexico.” Complaint ¶ 16, at 5. “[Real Estate Law] has made direct telephone solicitations to New Mexico consumers and has advertised its services in filing mass joinder lawsuits and mortgage modifications.” Complaint ¶ 17, at 5. “[Real Estate Law] has filed dozens of frivolous mass joinder lawsuits against a variety of banks, enticing hundreds of homeowners, including at least 23 New Mexico homeowners, to join these lawsuits as a way to obtain better loan terms.” Complaint ¶ 18, at 5. The Defendants “created the fiction of . . . mass action joinder lawsuits to disguise . . . advance fees as legal fees.” Complaint ¶ 23, at 6. Balanced Legal “offers legal services including loan modification and bankruptcy services” via a website “accessible to New Mexico consumers.” Complaint ¶ 33, at 7-8.

On its website, Balanced says, in close proximity to the words “LOWER YOUR MORTGAGE PAYMENTS TODAY!!” that “[w]e work with litigation firms that sue lenders in individual or mass tort cases. Potential results of lawsuits can include but not limited to the following: -- Principal reduction -- Monetary damages -- Lowered interest rates. Cancellation of the loan if severe fraud was present”.

Complaint ¶ 35, at 8 (emphasis and alteration in Complaint).

         Mr. Pratt faced disciplinary charges from the State Bar of California in November, 2013, “for (among other things) allowing non-attorney staff to practice law, making false statements to entice clients to retain RELC, failing to return un-earned fees, and for bringing ‘meritless' lawsuits for consumers.” Complaint ¶ 39, at 8. “The charges against Pratt resulted in a Decision by the State Bar Court of California ordering one year suspension, three years' probation and restitution to certain consumers.” Complaint ¶ 40, at 8.

         PROCEDURAL BACKGROUND

         New Mexico contends 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 ¶¶ 102-08, 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 MFCFPA, and the NMUPA permit, see Complaint ¶¶ (A)-(F), at 24.

         The Parwatikar Defendants -- Mr. Parwatikar, Balanced Legal, and Pinnacle Law -- and Mr. Pratt are the only Defendants with liability issues remaining in this case. On June 11, 2018, the Court entered a default judgment against Real Estate Law on all liability issues, “reserving the issues of relief, including disgorgement, restitution and civil penalties.” Default Judgment Against Real Estate Law Center at 1, filed June 11, 2018 (Doc. 75). See id. at 1-2. 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 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, 2019 WL 259121, at *1, *4, filed January 18, 2019 (Doc. 106). In the MOO, the Court granted summary judgment in the Parwatikar Defendants and Mr. Pratt's favor on New Mexico's NMUPA claims, injunctive relief claims, and theories based on: (i) Davis' alleged MARS Rule violations; (ii) Balanced Legal's and Pinnacle Law's violation of the MARS Rule independent of Real Estate Law; (iii) Mr. Parwatikar's and Mr. Pratt's participation in a common enterprise with Real Estate Law, Balanced Legal, and Pinnacle Law; and (iv) Mr. Pratt's reckless or knowing violation of the MARS Rule, or willful violation of the MFCFPA. See MOO at 183-84, 2019 WL 2804575, at *68.

         At the hearing on June 18, 2109, the Court stated that it would hold a hearing to discuss motions in limine and last-minute pretrial details on July 2, 2019. See Draft Transcript of Hearing at 30:14-18 (taken June 18, 2019)(Court)(“June 18 Tr.”).[4] The Court stated that it would set the hearing for 3:00 p.m. on Tuesday, July 2, 2019, but indicated that it had a criminal hearing scheduled for 1:30 p.m. on Tuesday, July 2, 2019, and that the Court and the parties would need to be flexible, and the parties agreed to the Court's proposition. See June 18 Tr. at 31:17-32:5 (Court, Anaya-Allen, Kennedy, Pratt). On June 18, 2019, the Court's Courtroom Deputy noticed the hearing for 3:00 p.m. on July 2, 2019. See Notice of Hearing, filed June 18, 2019 (Doc. 154). On June 26, 2019, the Courtroom Deputy rescheduled the hearing for 1:30 p.m. on July 2, 2019. See Notice of Hearing on Motion 160 Motion in Limine, 161 Motion in Limine, 162 Motion in Limine, filed June 26, 2019 (Doc. 165); Amended Notice of Hearing, June 27, 2019 (Doc. 167).

         I. The Undisclosed Evidence MIL.

         Mr. Pratt asks that the Court exclude, pursuant to FRCP 3017[5] all non-disclosed evidence. See Undisclosed Evidence MIL at 1. Mr. Pratt writes:

As per FRCP 3017 ALL evidence NOT included in the initial disclosure Rule 26 [of the Federal Rules of Evidence] shall be excluded at trial. . . .
II. NMAG list of plaintiffs adverse to PRATT
1. ROBERT ALEXANDER alleged plaintiff is now DECEASED.
No. probate, no personal representative, cannot proceed against PRATT. No. “standing” to proceed.
2. JOSE CEDENO, “in rem” judgment adverse to him and sold his rights to an investor. As per theadverse [sic] judgment and selling of his rights Mr. Cedeno has no claim here.
3. MARTHA LEARY, [sic] foreclosure judgment adverse to her so claim barred.
4. LARRY MADRID, foreclosure judgment adverse to him bars claim.
5. CREIGHTEN MANESS, foreclosure judgment adverse to him bars claim.
6. MIKE MANESS, foreclosure judgment adverse to him bars claim.
FULL REFUND PAID.
7. RACHEL SILVA, foreclosure judgment adverse to him bars claim.
PRATT LEFT RELC SEP 13TH AND THIS PLAINTIFF IS NOT HIS RESPONSIBILITY AS ALL ALLEGED MARS ACTIVIY WAS SUBSEQUENT.
8. VICKI SULLIVAN (DECEASED) No. [sic] standing to proceed. No. probate, no personal representative, cannot proceed against PRATT.
9. LLOYD TRUJILLO. Stipulated judgment of foreclosure bars suit here as he ADMITTED to the foreclosure per the stipulation.
10. VALERIE TRUJILLO. (SAME AS LLOYD TRUJILLO)
11. LINDA WARD . [sic] no information or facts.
ALL SUCH INFORMATION IS NEWLY PROVIDED TO PRATT AND WAS NOT DISCLOSED PRIOR. ALL SUCH INFORMATION SHOWS NO LIABILITY AS TO PRATT.

         Undisclosed Evidence MIL at 1-2 (emphasis, ellipses, and capitalization in Undisclosed Evidence MIL). Pratt notes in a footnote following the quoted list: “ALL such facts and information is just newly provided here.” Undisclosed Evidence MIL at 2 n.1 (capitalization in Undisclosed Evidence MIL). Pratt proceeds to argue:

Death of ROBERT ALEXANDER was NEVER disclosed. The mortgage information and facts, foreclosure judgments, and ALL alleged MARS violations by PRATT, if any exist at all, were NOT disclosed prior of persons 1-11 set forth above.
Finally, LARRY MADRID and MIKE MANESS were not disclosed Prior.

         Undisclosed Evidence MIL at 3 (capitalization in Undisclosed Evidence MIL). Mr. Pratt concludes: “It is submitted, that all such information excludes and bars all such testimony of alleged plaintiffs, 1-11, and that all shall and should be barred at trial. Alternatively, an FRCP 403[6] hearing must take place to determine the validity of their claims.” Undisclosed Evidence MIL at 3 (emphasis in Undisclosed Evidence MIL).[7]

         2.The Undisclosed Evidence MIL Response.

         New Mexico responds. See Plaintiffs Response to Pratt's Motion Limine #1 of Chad T-W Pratt, Sr. to Exclude Undisclosed Evidence at 1-3, filed July 1, 2019 (Doc. 173)(“Undisclosed Evidence MIL Response”). New Mexico asks that the Court deny Mr. Pratt's Undisclosed Evidence MIL, “as it is not well-taken and contains errors of fact as well as failing to provide the legal basis for its arguments.” Undisclosed Evidence MIL Response at 1. New Mexico argues that Mr. Pratt cites no “legal basis” for his arguments “that the foreclosure of the consumers' homes bars the claims against him” and that New Mexico knows of no such basis. Undisclosed Evidence MIL Response at 1. See Undisclosed Evidence MIL Response at 1-2. New Mexico asserts that it is the Plaintiff in this case, that the New Mexico consumers' standing is irrelevant, and “that these consumers lost their homes in foreclosure is a consequence of the scam perpetrated by Defendants and does not bar the State's claims.” Undisclosed Evidence MIL Response at 2. See Undisclosed Evidence MIL Response at 1-2. New Mexico explains that it disclosed to Mr. Pratt information about his listed New Mexico consumers:

The initial disclosures provided to Defendant Pratt included records related to Robert Alexander (NMOAG000353-409), Jose Cedeno (NMOAG000410-433), Martha Leary (NMOAG000746-878), Larry Madrid (NMOAG000879-935, 002903-3204), Creighton Maness (NMOAG000936-970), Mike Maness (NMOAG000971-1094, 002210-2351, 003205-3538), Rachel Silva (NMOAG 001175-1280, 00374-3751), Vicki Sullivan (NMOAG001319-1343), Lloyd Trujillo (NMOAG001380-1477, 003544-3635), Valerie Trujillo (NMOAG001478-1566, 002440-2484, 003636-3734), Linda Ward (NMOAG001866-1933, 002252-2588). Plaintiff responded to Defendant Pratt's First and Second Requests for Production of Documents and identified relevant documents in response to inquiries about Mike Maness (“Mike M.”) and Larry Madrid (“Larry M.”). Additional documents related to Mr. Maness (NMOAG014838-14845) and further identification of documents related to both Mr. Madrid and Mr. Maness were provided in Plaintiffs First and Second Supplemental Responses to Parwatikar and Supplemental Response to Pratt.

         Undisclosed Evidence MIL Response at 2. New Mexico contends that it “is not sure why Mr. Pratt is objecting with respect to when he learned of Mr. Alexander's death. The issues before the court relate to Mr. Pratt's actions and whether those actions violate the laws plead [sic], not whether the consumers are still alive.” Undisclosed Evidence MIL Response at 2. New Mexico explains, regarding Mr. Pratt's request for a rule 403 of the Federal Rules of Evidence hearing, that rule 403 “provides that relevant evidence may be excluded for prejudice, confusion, waste of time or other reasons. Defendant does not illustrate how any of these bases for a Rule 403 exclusion would support barring testimony relating to any of the consumers identified in this motion.” Undisclosed Evidence MIL Response at 3.

         3. The Practice of Law MIL.

         Mr. Pratt writes that he “submits his Motion Limine #2 that absolutely guarantees his right to practice law per the 5th Amendment ‘due process' clause, and per the authority vested in the California legislature and California state bar.”[8] Practice of Law MIL at 1. Mr. Pratt argues:

PRATT was duly licensed to practice law by the State of California, and was litigating cases on behalf of the alleged new mexico [sic] Plaintiffs at all relevant times.
The NMAG and this honorable court cannot take away or abrogate such right of PRATT.
There is no finding, legal ruling, or other such admissible “evidence”, and NONE has been presented here that any lawsuit(s) filed by PRATT were “frivolous” at any time. As such, PRATT was simply practicing law at all times.

         Practice of Law MIL at 2 (capitalization in Practice of Law MIL). According to Pratt, “all such information excludes and bars all such testimony of alleged plaintiffs, that the practice of law by PRATT was illegal, wrong, at any time or times.” Practice of Law MIL at 2.

         4. The Practice of Law MIL Response.

         New Mexico responds, and asks “that the Court deny the motion as it is not well-taken and contains errors of fact as well as failing to provide the legal basis for its arguments.” Plaintiffs Response to Defendant Pratt's “Motion Limine #2” [Doc 161] to Allow Practice of Law at 1, filed July 1, 2019 (Doc. 176)(brackets added)(“Practice of Law MIL Response”). New Mexico avers that Mr. Pratt cites no authority for his right to practice law. See Practice of Law MIL Response at 2. New Mexico argues:

The license to practice law comes with great responsibilities and guidelines and no “right” to practice law can evade, for example, the Federal Rules of Civil Procedure. Rule 11(b) requires that attorneys sign pleadings and that their signature represents the the [sic] claims therein are not frivolous and are warranted by existing law; and that the factual contentions plead [sic] have evidentiary support.

         Practice of Law MIL Response at 2 (footnotes omitted)(citing Fed.R.Civ.P. 11(b)(2)-(3)). According to New Mexico, whether Mr. Pratt's lawsuits were “disingenuous” is relevant and admissible, “[b]ecause Defendant Pratt is accused of filing sham lawsuits to avoid federal and state laws that prohibit advance fees for loan modifications.” Practice of Law MIL Response at 2 (footnote omitted). New Mexico adds that courts have found attorneys to have violated the MARS Rule although the attorneys practiced law and notes that, “[a]lthough the MARS rule does exempt attorneys practicing law in the state where they are licensed, such exception is not applicable to the facts presented here. Here, Defendant Pratt was licensed to practice in California, but he purported to represent New Mexico homeowners with New Mexico properties.” Practice of Law MIL Response at 2. In New Mexico's view, the MARS Rule's attorney exemption cannot, therefore, provide a basis for the Practice of Law MIL. See Practice of Law MIL Response at 3.

         5. The State Bar MIL.

         In the State Bar MIL, Mr. Pratt requests that the Court exclude “the adverse state bar ruling against him of Michelle Pickerell, Jesse Rivera, and Tracy Torme.” State Bar MIL at 1. Mr. Pratt argues:

It must be further noted that the state bar did NOT impose the “death penalty” and “disbar” PRATT, nor did it “shut down” RELC. Rather it limited its findings to the three persons set forth above and their alleged claims. [In RE: Romano, 64 Cal.2d 826, [(415 P.3d 798 (Cal. 1966)] (PRATT has been disciplined by the California state bar and cannot be punished again here.)

         State Bar MIL at 2.[9] Mr. Pratt cites rule 608 for the proposition that specific instances of bad conduct cannot be shown with extrinsic evidence to prove bad conduct in another circumstance. See State Bar MIL at 2.[10] Mr. Pratt argues:

As per Federal rule of evidence 608(b) NMAG may cross-examine on “[s]pecific instances of . . . conduct” only if the instances are probative of truthfulness or untruthfulness”, and only “in the discretion of the court”. NMAG cannot argue that PRATT was wrong in state bar cases so he is wrong here. Before NMAG may impeach a witness about specific acts of misconduct they Must [sic] have a good faith belief such bad conduct occurred. [US vs Whitmore, 359 F.3d 609, 622 (D.C. Cir.2004)(uthe general rule . . . is that the questioner must be in possession of some facts which support a genuine belief that the witness committed the offense or the degrading act to which the question relates”) [sic] Here, not only does NMAG NOT have such belief or facts, it does NOT even have any evidence of MARS “violations” by PRATT. (NO documents of PRATT MARS violations . . . .).

         State Bar MIL at 2-3 (emphasis, capitalization, and ellipsis in State Bar MIL). Mr. Pratt adds that, pursuant to rules 404 and 405, New Mexico cannot use such prior bad act evidence to prove his later acts. See State Bar MIL at 3. Mr. Pratt asks, accordingly, that the Court exclude all “testimony, inquiry, or admission of the adverse state bar action to PRATT at trial of this matter.” State Bar MIL at 3 (capitalization in State Bar MIL).

         6.The State Bar MIL Response.

         New Mexico responds and “suggests that Pratt's motion must be denied because the evidence demonstrates a routine practice of Real Estate Law Center (RELC) under Pratt, admissible under Rule 406 and constitutes an exception to Rule 404(b).” State Bar MIL Response at 1. New Mexico summarizes its purpose for introducing the evidence:

[T]he [In the Matter of Chad Thomas Pratt, No. 13-O-12312, Decision (State Bar Ct. Cal. Sept. 18, 2014), filed July 1, 2019 (Doc. 174)(“In re Pratt Decision”)] is offered to demonstrate that Pratt, the lead attorney for RELC, operated an organization that consistently conducted itself in a routine manner: RELC solicited clients, claiming to be experts in bank litigation, had them sign a retainer agreement, charged an upfront fee of thousands of dollars, and promised to assist clients in renegotiating their mortgages. The earlier, 2013, Stipulation entered by the California State Bar Court[, see In the Matter of Chad T. Pratt, No. 12-O-16642, Stipulation re Facts, Conclusions of Law and Disposition and Order Approving (State Bar Ct. Cal. Oct. 18, 2013), http://members.calbar.ca.gov/fal/Licensee/Detail/149746 (last visited July 3, 2019)(“In re Pratt Stipulation”), ] demonstrates a practice of failing to use a client trust account. Evidence demonstrating a routine practice is admissible under Federal Rule of Evidence 406. Additionally, the [(In re Pratt] Decision is offered to prove Defendants' state of mind in order to demonstrate willfulness under the New Mexico Unfair Practices Act (“UPA”)”), and therefore also admissible under Federal Rule of Evidence 404(b)(2).

         State Bar MIL Response at 2.

         First, New Mexico describes that the United States Court of Appeals for the Tenth Circuit “has ruled that for evidence of an organization's practice to be admissible under Rule 406, it ‘must be reasonably regular and uniform.'” State Bar MIL Response at 3 (quoting United States v. Oldbear, 568 F.3d 814, 822 (10th Cir. 2009)). New Mexico argues that the In re Pratt Decision, which shows three instances of Real Estate Law requiring advance fees, see State Bar MIL Response at 3 (citing In re Pratt Decision at 6, 9, 13), and the New Mexico consumers attorney-client fee agreements, see State Bar MIL Response at 3-4 (citing Attorney-Client Fee Agreement, Linda Ward, filed July 1, 2019 (Doc. 174)), which require advance fees, show such a custom, and that this “procedure, entering a retainer agreement with and accepting advance fees from clients is relevant to establish a violation of the Mortgage Assistance Relief Services rule, ” State Bar MIL Response at 4. New Mexico cites Guidance Endodontics, LLC v. Dentsply Int'l Inc., 705 F.Supp.2d 1265 (D.N.M. 2010)(Browning, J.)(“Guidance Endodontics”), to show that “[t]his Court has examined the applicability of Rule 406 to the use of court cases of tangential matters offered as evidence to prove a routine practice, ” and explains that “this Court granted in part and denied in part the proponent's arguments that litigation in tangential matters constituted sufficient ‘reasonably regular and uniform' conduct to be admissible under Rule 406.” State Bar MIL Response at 4 (citing Guidance Endodontics, 705 F.Supp.2d at 1272). According to New Mexico, “[w]hile the Court did not find sufficient regularity to admit prior litigation under Rule 406, the Court did find that the evidence demonstrated the defendants' state of mind for the action at issue and declined to exclude under Rule 404.” State Bar MIL Response at 4 (citing Guidance Endodontics, 705 F.Supp.2d at 1272). New Mexico argues that the behavior here “is the normal procedure by which RELC inducted every new client into their practice, ” and not “something as infrequent or individualized as” the litigation that Guidance Endodontics discusses. State Bar MIL Response at 5. According to New Mexico, the Court should, therefore, allow the In re Pratt evidence's introduction. See State Bar MIL Response at 5.

         New Mexico further contends that the Court should admit the In re Pratt evidence as evidence of the Defendants' state of mind. See State Bar MIL Response at 5. According to New Mexico, the Tenth Circuit has a test for rule 404(b) evidence:

“(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.”

         State Bar MIL Response at 5 (quoting Peshlakai v. Ruiz, 39 F.Supp.3d 1264, 1321 (D.N.M. 2014)(Browning, J.)). New Mexico explains that Mr. Pratt willfully and in bad faith violated the MFCFPA; that New Mexico must, therefore, establish Mr. Pratt's willfulness; and that “[t]his Court in Guidance Endodontics concluded that a ‘prior course of similar conduct, if believed by the jury, makes it more likely that the Defendants' acts in this case were willful and not merely coincidental or reactionary.'” State Bar MIL Response at 6 (citing Guidance Endodontics, 705 F.Supp.2d at 1271). New Mexico explains that the In re Pratt evidence meets the first two requirements of the Tenth Circuit's test:

The evidence here, as in Guidance Endodontics, establishes a “prior course of similar conduct.” [Guidance Endodontics, 705 F.Supp.2d at 1271.] The ongoing scheme in which Real Estate Law Center induced clients to execute a retainer agreement, pay advance fees, join as plaintiffs in sham litigation against lenders, and nominally offering mortgage modification services is well detailed in the decision of the Bar Court. See [In re Pratt Decision] at 4-14. This explication, if admitted, would tend to lessen the probability that Defendants' actions in regard to New Mexico consumers were coincidental or non-willful. Therefore, such evidence meets the requirements that evidence must be offered for a proper purpose and relevant.

         State Bar MIL Response at 6. New Mexico avers that the Court should treat the third and fourth factors “as moot, ” because the Court has previously concluded that rule 403 exclusions are improper at bench trials, see State Bar MIL Response at 7 (citing Coffey v. United States, No. CIV 08-0588 JB/LFG, 2012 WL 1698289, at *3-4 (D.N.M. May 8, 2012)(Browning, J.)), and, because the prejudicial effect against which rule 403 protects is irrelevant, the Court does not need to instruct the jury to consider the evidence only for the purposes for which the proponent offers it, see State Bar MIL at 7.

         7. The Hearing.

         Mr. Pratt did not attend the July 2, 2019, hearing in person or call the telephone conference number for the hearing, see Draft Transcript of Hearing at 3:8-20 (taken July 2, 2019)(Court)(“ July 2 Tr.”), so the Court called Mr. Pratt's telephone number to reach him, see July 2 Tr. at 2:4-8 (Court); id at 3:10 (Court). Mr. Pratt conveyed to the Court's Courtroom Deputy that he was unaware of the hearing. See July 2 Tr. at 2:9-10 (Clerk). Mr. Pratt indicated that he was in court and would not join the hearing, and he did not call the telephone conference number before the Court began the hearing. See July 2 Tr. at 3:20-24 (Court). Mr. Pratt later joined the hearing through the telephone conference number. See July 2 Tr. at 6:4 (Pratt).

         After the Court invited Mr. Pratt to begin discussing his motions, see July 2 Tr. at 10:20-22 (Court), Mr. Pratt admitted: “I'm at a handicap Your Honor, I do not have [them in] front of me. . . . I was not aware the hearing was today, ” July 2 Tr. at 10:23-25 (Pratt). The Court asked Mr. Pratt to begin with the Undisclosed Evidence MIL. See July 2 Tr. at 11:15-21 (Court). Mr. Pratt argued: “[I would] submit on the motions. I don't have [anything] from the foreclosure judgment against that plaintiffs. I don't have the mortgage [notices] against the plaintiffs. And I don't have any documents showing any [MARS] violations [committed] by me.” July 2 Tr. at 12:8-13 (Pratt). Multiple times during Mr. Pratt's argument, the Court alerted him that the telephone connection was not good and that the people in the courtroom could not hear him, and requested that Mr. Pratt move to a location or to a telephone with better reception. See July 2 Tr. at 11:25-12:5 (Court); id at 12:14-18 (Court); id at 12:25-13:2 (Court). Mr. Pratt eventually responded that he was “in the federal bankruptcy [c]ourt in Los Angeles[, ] California, ” July 2 Tr. at 12:23-24 (Pratt), and that he would submit on his motions, see July 2 Tr. at 13:3-4 (Pratt). The Court stated that, because it could not understand what Mr. Pratt said, it would judge Mr. Pratt not in attendance at the hearing. See July 2 Tr. at 13:5-7 (Court). The Court invited Mr. Pratt to listen to the hearing, or to find a position from which to speak to the Court and to the other parties where they could hear his statements. See July 2 Tr. at 13:7-13 (Court). Mr. Pratt responded: “I'll find a better phone, thank you, your Honor, ” and left the telephone conference. July 2 Tr. at 13:14-15 (Pratt).

         The Parwatikar Defendants added to Mr. Pratt's arguments that New Mexico disclosed considerable discovery late in the case and after discovery closed. See July 2 Tr. at 13:19-14:7 (Kennedy). The Court responded that it understood Mr. Pratt to be asking for the exclusion of all evidence not included in the initial disclosures, but that, because such an exclusion would exclude all evidence obtained through discovery, Mr. Pratt's request was too broad as stated. See July 2 Tr. at 14:18-15:1 (Court). The Court summarized that Mr. Pratt discussed foreclosure judgments, people being dead, and lack of probate, but indicated that the Court did not understand that New Mexico would attempt to introduce such evidence. See July 2 Tr. at 15:4-11 (Court). New Mexico responded that it included in its initial disclosure information related to the listed New Mexico consumers. See July 2 Tr. at 15:14-20 (Anaya-Allen). The Court asked New Mexico whether it planned to introduce any of the material that Mr. Pratt complained that he lacked regarding the listed New Mexico consumers. See July 2 Tr. at 15:21-24 (Court). New Mexico responded that it is the Plaintiff, that the listed New Mexico consumers might serve as witnesses, and that it disclosed these individuals in the initial disclosures. See July 2 Tr. at 16:4-11 (Anaya-Allen). New Mexico explained that it did not understand Mr. Pratt's argument regarding the foreclosure judgments' relevance, because this case involves New Mexico's claims and not those claims of the listed New Mexico consumers. See July 2 Tr. at 16:11-15 (Anaya-Allen). New Mexico added that the foreclosure judgments also might strengthen individual claims ...


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