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State 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 the Defendants' Motion for Protective Order and to Quash Subpeonoas Duces Tecum, filed June 13, 2019 (Doc. 153)(“Motion”). The Court held a hearing on June 18, 2019. See Clerk's Minutes Before the Honorable James O. Browning, filed June 18, 2019, (Doc. 155). The primary issues are whether: (i) the Court should allow Plaintiff State of New Mexico to take trial depositions outside the discovery period; and (ii) the Court should award attorneys' fees to Defendants Deepak S. Parwatikar, Balanced Legal Group, and Pinnacle Law Center (collectively, the “Parwatikar Defendants”) for having to file the Motion. Because the Parwatikar Defendants seek to enforce the existing discovery deadline, which has passed, and because the federal rules do not distinguish between trial depositions and regular discovery depositions, the Court will grant the Parwatikar Defendants' Motion.

         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”), Erikson M. Davis, Chad T. Pratt, and the Parwatikar Defendants. See Complaint ¶¶ 16-76, at 5-17. Mr. Davis, Mr. Pratt, and Mr. Parwatikar are residents of and attorneys licensed in California. See Complaint ¶¶ 10-12, at 4-5. Neither Mr. Davis nor Mr. Pratt is licensed to practice law in New Mexico. See Complaint ¶¶ 10-11, at 4-5. Real Estate Law “is a Professional Corporation registered in California.” Complaint ¶ 9, at 4. 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, and Real Estate Law provides Pinnacle Law eighty percent of the fees that Real Estate Law receives, see Complaint ¶ 21, at 6. Balanced Legal “is a California law firm owned and/or managed by Parwatikar.” Complaint ¶ 14, at 5. Balanced Legal uses the same address -- 695 S. Vermont Ave., Los Angeles, California 90010 -- as Real Estate Law and Pinnacle Law. See Complaint ¶ 34, at 8.

         The Defendants “created the fiction of . . . mass action joinder lawsuits to disguise . . . advance fees as legal fees.” Complaint ¶ 23, at 6. Real Estate Law “ offerslegal representation, mortgage foreclosure consulting and mortgage modification services to homeowners 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. Balanced Legal provides legal 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). Real Estate Law has had “at least twenty-three . . . New Mexico consumers since 2013.” Complaint ¶ 58, at 13.

         PROCEDURAL BACKGROUND

         New Mexico alleges that: (i) Real Estate Law violated the Mortgage Assistance Relief Services Rule, 12 C.F.R. 1015.1, “Regulation O, ” by soliciting and accepting advance fees from New Mexico residents before “a mortgage modification agreement [was] finalized, ” Complaint ¶ 84, at 19; (ii) the Defendants violated the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act, N.M. Stat. Ann. §§ 47-15-1 to -8, by offering services to save “consumers' homes from foreclosure, ” requiring payment for services before completing the services, and not providing required “warnings, notices, and disclosures, ” Complaint ¶ 87, at 20; and (iii) the Defendants violated the New Mexico Unfair Practices Act, N.M. Stat. Ann. §§ 57-12-1 to -26, by requiring “a large up-front fee . . . plus monthly maintenance fees, ” providing “no value to the consumers, ” and leading consumers to believe that the Defendants will help defend “a foreclosure lawsuit, ” Complaint ¶ 105, at 22. The Court held a scheduling conference on June 28, 2018. See Order Setting Case Management Deadlines and Discovery Parameters at 1, filed June 28, 2018 (Doc. 78)(“Scheduling Order”). The Court filed the Scheduling Order, indicating that discovery would close on January 4, 2019. See Scheduling Order at 2. New Mexico sought to extend the discovery period to close on May 24, 2019, see Plaintiff's Motion for Extension of Deadlines, at 1 filed December 3, 2018 (Doc. 95), but the Court denied the request to extend the discovery deadline, see Memorandum Opinion and Order, March 19, 2019, at 2 (Doc. 116)(“MOO”).

         1. The Motion.

         The Parwatikar Defendants ask that the Court grant a protective order to preclude New Mexico from taking out-of-state depositions duces tecum less than three weeks before the trial's anticipated start date. See Motion at 1. The Parwatikar Defendants also ask that the Court quash the related subpoenas. See Motion at 1. The Parwatikar Defendants explain that, under rule 26(c)(1) of the Federal Rules of Civil Procedure, they conferred with New Mexico on June 13, 2019, and that the parties were unable to reach a resolution before the submission of this Motion. See Motion at 1 (citing D.N.M.LR-Civ. 30.2). The Parwatikar Defendants note, however, that the parties can continue to confer about issues related to document authenticity. See Motion at 1.

         The Parwatikar Defendants state that discovery closed on January 4, 2019. See Motion at 1 (citing Scheduling Order at 2; MOO at 19). The Parwatikar Defendants also state that the trial is set for July 8, 2019, just over three weeks from the date of filing for this Motion. See Motion at 2. The Parwatikar Defendants state that, on June 6, 2019, New Mexico contacted them to set up trial depositions for June 19 and 20, 2019, to be taken by telephone. See Motion at 2. The Parwatikar Defendants assert that New Mexico did not provide the proposed times, places, or witnesses for the proposed depositions and, further, that New Mexico did not obtain consent from the Parwatikar Defendants before noticing three depositions duces tecum at 5:46 pm, June 12, 2019. See Motion at 2 (citing Email from Mary Krebbs to Paul Kennedy, Jessica Hernandez, and Elizabeth Harrison (sent June 12, 2019), filed June 13, 2019 (Doc. 153-2)(“June 12 Email”); Notices to Take Trial Depositions Duces Tecum at 1, 3, 5, filed June 13, 2019 (Doc. 153-3)(“Deposition Notices”)). The Parwatikar Defendants assert that the notices for these depositions indicate that New Mexico “intends to take three depositions duces tecum telephonically, with deponents in the following locations: Minneapolis, Minnesota; San Francisco, California; and Los Angeles, California.” Motion at 2. The Parwatikar Defendants state that the depositions are scheduled for June 20, 2019, at 8:00 am, 10:00 am, and 2:00 pm. See Motion at 2. The Parwatikar Defendants also assert that New Mexico provides three subpoenas related to the documents requested in these notices. See Motion at 2 (citing Subpeonas to Testify at a Trial Deposition Decus Tecum in a Civil Action at 1, 6, 10, filed June 13, 2019 (Doc. 153-4)(“Subpoenas”)).

         The Parwatikar Defendants assert that the notices refer, in part, to rules 803(6) and 902(11) of the Federal Rules of Evidence, related to foundation, and that New Mexico suggested on June 13, 2019, that disagreement about two of the three deposition notices may be resolved in part if the Parwatikar Defendants will waive their objections to authenticity. See Motion at 2. The Parwatikar Defendants assert that New Mexico seeks extensive documentation through the notices and subpoenas, including bank statements, canceled checks, agreements, emails, invoices and “many other records going back several years.” Motion at 2 (citing Deposition Notices; Subpoenas). The Parwatikar Defendants assert that nothing has been filed to show the date or time that the subpoenas were served, but that the subpoenas themselves appear to have a service date of June 12, 2019. See Motion at 3 (citing Fed.R.Civ.P. 45(b)(4); Subpoenas). The Parwatikar Defendants assert that New Mexico's email concerning the depositions states only that New Mexico forwarded copies to the Parwatikar Defendants “for [their] information and files.” Motion at 3 (citing June 12 Email at 1).

         The Parwatikar Defendants argue that the June 12, 2019, notices of depositions duces tecum and subpoenas duces tecum do not comply with the Federal Rules of Civil Procedure requirements regarding adequate notice and out-of-time discovery. See Motion at 3. The Parwatikar Defendants state that they have previously objected to New Mexico's untimely filings and late disclosures in this case. See Motion at 3 (citing Defendants Parwatikar's Objections, filed May 25, 2019 (Doc. 147); Fed.R.Civ.P. 37(c)(1)). The Parwatikar Defendants ask for expenses and sanctions under rule 26(c)(3) and rule 37(a)(5) of the Federal Rules of Civil Procedure. See Motion at 3.

         The Parwatikar Defendants argue that notice of deposition must be served to the other party at least fourteen days before the scheduled deposition and that notice must: (i) be in writing; (ii) state the time and place of the deposition; and (iii) state the name of the deponent and his, her, or its address or a general description sufficiently identifying the person or class/group to which the person belongs. See Motion at 3 (citing Fed.R.Civ.P. 30(b)(1); D.N.M.LR-Civ. 30.1). The Parwatikar Defendants further assert that depositions “by remote means, ” including the telephone, can be taken only upon stipulation of all parties or with a court order. Motion at 3 (citing Fed.R.Civ.P. 30(b)(4)).

         The Parwatikar Defendants also argue that subpoenas have notice requirements requiring that if a “subpoena commands the production of documents . . . then before it is served on the person to whom it is directed, a notice and a copy of the subpoena must be served on each party.” Motion at 3-4 (citing Fed.R.Civ.P. 45(a)(4)). The Parwatikar Defendants assert that fourteen days are typically allowed to serve objections. See Motion at 4 (citing Fed.R.Civ.P. 45(d)(2)(B)). The Parwatikar Defendants argue that New Mexico provides notice less than eight days before the depositions and that New Mexico does not provide any notice under rule 45(a)(4) of the Federal Rules of Civil Procedure before serving its subpoenas. See Motion at 4 (citing Subpoenas). The Parwatikar Defendants argue that the short notice, rapid consecutive timing, locations, and manner of the depositions will “make it all but impossible for [the Parwatikar Defendants'] counsel to attend these depositions in-person to cross-examine the witness.” Motion at 4.

         The Parwatikar Defendants assert that depositions may proceed after discovery closes but argue that the depositions can only proceed for good cause and with the judge's consent. See Motion at 4 (citing Fed.R.Civ.P. 16(b)(4)). The Parwatikar Defendants argue that good cause “means that scheduling deadlines cannot be met despite a party's diligent efforts.” Motion at 4 (quoting Street v. Curry Bd. of Cty. Comm'rs, No. CIV 06-0776 JB/KBM, 2008 WL 2397671, at *6 (D.N.M. Jan 30, 2008)(Browning, J.)). The Parwatikar Defendants argue that the “party seeking an extension must show that despite due diligence it could not have reasonably met the scheduled deadlines. Carelessness is not compatible with a finding of diligence and offers no reason for a grant of relief.” Motion at 4 (quoting Mann v. Fernandez, 615 F.Supp.2d 1277, 1285 (D.N.M. 2009)(Browning, J.)). The Parwatikar Defendants argue that, similarly, parties should not be allowed to use a subpoena to obtain material from third parties after the discovery deadline when the materials could have been produced before the deadline. See Motion at 4 (citing 9A Charles Alan Wright et al., Federal Practice and Procedure Civil § 2452 (3d ed. 2019)). The Parwatikar Defendants argue that this Court may exercise its discretion to quash subpoenas duces tecum issued to third parties outside the discovery period on a party's motion. See Motion at 4-5 (citing E.E.O.C. v. BOK Fin. Corp., No. CIV 11-1132 RB/LAM, 2014 WL 11829321, at *2 (D.N.M. Feb. 4, 2014)(Brack, J.); Peterbilt of Great Bend, LLC v. Doonan, 2006 WL 3193371, at *2 (D. Kan. Nov. 1, 2006)(Marten, J.); Revander v. Denman, 2004 WL 97693, at *1 (S.D.N.Y. Jan. 21, 2004)(Holwell, J.)).

         The Parwatikar Defendants assert that, in Hartnett v. Papa John's Pizza, Inc., the Court considered a party's request to depose a witness whose existence was not kept secret, but whose significance the party had not appreciated until the end of discovery. See Motion at 5 (citing Hartnett v. Papa John's Pizza, Inc., No. CR 11-2860 JB, 2012 WL 6962985, at *4 (D.N.M. Oct. 10, 2012)(Browning, J.)(“Hartnett”). The Parwatikar Defendants draw on this Court's analysis of the party's request to take the witness' deposition out of time as a request to reopen discovery, asserting that the Court considered Rule 16's diligence requirements as well as the factors that the United States Court of Appeals for the Tenth Circuit established in Smith v. United States, 834 F.2d 166 (10th Cir. 1987)(“Smith”). See Motion at 5 (citing Hartnett, 2012 WL 6962985, at *5-6). The Parwatikar Defendants argue that the Smith factors include: “1) whether trial is imminent, 2) whether the request is opposed, 3) whether the non-moving party would be prejudiced, [and] 4) whether the moving party was diligent in obtaining discovery within the guidelines established by the court.” Motion at 5 (citing Smith, 834 F.2d at 169). The Parwatikar Defendants assert that the Court refused to permit the deposition in Hartnett after weighing these factors, based in part on: (i) the trial being less than one month away; (ii) a party's opposition to the deposition; and (iii) a lack of demonstrated diligence to the Court's discovery deadlines on part of the party seeking the deposition. See Motion at 5 (citing Hartnett, 2012 WL 6962985, at *7).

         The Parwatikar Defendants assert that the Court also analyzed a request for out-of-time depositions in Skyline Potato Co., Inc. v. Tan-O-On Mktg. Inc., 285 F.R.D. 617, 629 (D.N.M. 2012)(Browning, J.)(“Skyline Potato Co.”). See Motion at 5. The Parwatikar Defendants argue that the Court's findings in Skyline Potato Co. are as follows: (i) trial was imminent because it was set for less than four months from the issuance of the opinion; (ii) the motion was opposed, weighing against reopening discovery; (iii) the opposing parties would be prejudiced by the additional travel costs and because they also had to forgo some discovery to comply with the discovery deadlines; and (iv) the parties seeking the deposition had not been diligent in obtaining the discovery within the deadlines imposed by the Court as the parties had notice of the potential need for the requested deposition long before the close of discovery. See Motion at 5-6 (citing 285 F.R.D. at 629-30).

         The Parwatikar Defendants argue that, in the present case, New Mexico has not asked for the Court's leave to take depositions duces tecum or to issue subpoenas duces tecum outside the discovery period and, subsequently, that New Mexico has not shown good cause for their untimeliness. See Motion at 6 (citing Mann v. Fernandez, 615 F.Supp.2d at 1285; 9A Charles Alan Wright et al., Federal Practice and Procedure Civil § 2452 (3d ed.)). The Parwatikar Defendants also argue that the Smith factors weigh against permitting depositions duces tecum and further subpoenas for obtaining records. See Motion at 6 (citing Smith, 834 F.2d at 169). The Parwatikar Defendants argue that, like in Hartnett, trial is less than one month away in the present case. See Motion at 6 (citing Hartnett, 2012 WL 6962985, at *7). The Parwatikar Defendants further argue that, like in Hartnett, the Parwatikar Defendants have established their opposition to moving the discovery deadline and have shown an “eagerness to go to trial.” Motion at 6 (citing Hartnett, 2012 WL 6962985, ...


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