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

United States District Court, D. New Mexico

December 9, 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 Santa Fe, 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 Plaintiff's Motion for Extension of Time to File Trial Exhibit List, filed June 28, 2019 (Doc. 170)(“Motion to Extend”); and (ii) the Motion Limine Number Four of Chad T-W Pratt, Sr. to Exclude All Witnesses, Evidence, filed July 1, 2019 (Doc. 179)(“Motion to Exclude”). The Court held a hearing on July 2, 2019. See Clerk's Minutes at 1, filed July 3, 2019 (Doc. 185). The primary issue is whether the Court should extend the time for Plaintiff State of New Mexico to file its exhibit list by one day. Because all parties have the Plaintiff's Trial Exhibit List, filed June 28, 2019 (Doc. 169)(“Exhibit List”), and the Plaintiff's Amended Trial Exhibit List, filed June 28, 2019 (Doc. 172)(“Amended Exhibit List”), and New Mexico proceeded in good faith, though under a mistaken impression, the Court will grant the Motion to Extend. Because New Mexico's production of the Exhibit List is not so untimely as to prejudice those Defendants proceeding to trial -- Defendants Deepak S. Parwatikar, Chad T. Pratt, Balanced Legal Group, and Pinnacle Law Center, P.C. -- the Court will deny the Motion to Exclude.

         FACTUAL BACKGROUND

         The Court takes its facts from the Complaint for Violations of the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act (MFCFPA), Mortgage Assistance Relief Services (MARS) Rule, the New Mexico Unfair Practices Act (UPA) 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, P.C. (“Real Estate Law”) and Erikson M. Davis, Mr. Pratt, and the Parwatikar Defendants -- Parwatikar, Balanced Legal, and Pinnacle Law. See Complaint ¶¶ 16-76, at 5-17. Mr. 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. Mr. 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 December 6, 2019). Neither Mr. 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. Mr. 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 Real Estate Law 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 Mortgage Assistance Relief Services (“MARS”) Rule, 12 C.F.R. 1015.1 “Regulation O, ” 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 the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act, N.M. Stat. Ann. §§ 47-15-1 to -8 (“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 New Mexico Unfair Practices Act, N.M. Stat. Ann. §§ 57-12-1 to -26 (“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 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 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, 2019 WL 259121, at *1, *4, filed January 18, 2019 (Doc. 106). In the Memorandum Opinion and Order, filed July 2, 2019 (Doc. 183)(“MOO”), the Court granted summary judgment for the Parwatikar Defendants and Mr. Pratt on New Mexico's NMUPA claims, injunctive relief claims, and theories based on: (i) Mr. Davis' alleged MARS Rule violations; (ii) Balanced Legal's and Pinnacle ...


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