New Mexico ex rel. Balderas v. Real Estate Law Ctr., P.C.

406 F.Supp.3d 1049

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.

No. CIV 17-0251 JB\LF

United States District Court, D. New Mexico.

Filed July 11, 2019

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

JAMES O. BROWNING, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on: (i) Plaintiff's Motion to Provide Notice Under Rule 807 and to Establish Unavailability of Witness, filed April 26, 2019 (Doc. 133)("Unavailability Motion"); (ii) Plaintiff's Pretrial Motion under Rule 902 to Provide Notice of Plaintiff's Intent to Offer Bank Records, filed April 26, 2019 (Doc. 134)("Bank Records Motion"); and (iii) the objection of Defendants Deepak S. Parwatikar, Balanced Legal Group, Pinnacle Law Center, P.C. (collectively, the "Parwatikar Defendants"), to the Second Declaration and Affidavit of Caroline A. Dewey (executed June 6, 2016), filed May 24, 2019 (Doc. 143-1)("Second Dewey Aff."), in the Defendant Parwatikar's Objections to Plaintiff's Untimely Filings and Disclosures, filed May 25, 2019 (Doc. 147)(hereinafter, the "Objection"). 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 the Court should deem Caroline A. Dewey unavailable for purposes of rule 804 of the Federal Rules of Evidence, which provides hearsay exceptions for unavailable declarants, because she is deceased, and deem the First Dewey Affidavit¹ and the Second Dewey Aff. (collectively, the "Dewey Affidavits"), admissible pursuant to rule 807 of the Federal Rules of Evidence, the residual hearsay exception; (ii) whether the Court should disregard the Second Dewey Aff., pursuant to rule 37(c) of the Federal Rules of Civil Procedure, providing sanctions for failures to disclose pursuant to rule 26 of the Federal Rules of Civil Procedure's requirements, because Plaintiff State of New Mexico untimely disclosed the Second Dewey Aff.; and (iii) whether the Court should deem authenticated pursuant to rule 902(11) of the Federal Rules of Evidence, providing for authentication of domestic business records through certification of the record's custodian, and admissible, pursuant to rule 803(g) of the Federal Rules of Evidence, the business records hearsay exception, Bank Records of "accounts belonging to" Defendants Balanced Legal Group and Pinnacle Law Center, P.C. Bank Records Motion ¶ 2, at 1. The Court concludes that: (i) Dewey is unavailable, and that the Dewey Affidavits do not meet rule 807's requirements and are inadmissible; (ii) the Second Dewey Aff.'s late disclosure is harmless, so the Court would allow its admission were it admissible; and (iii) the Court will deem the Bank Records authenticated, because Parwatikar Defendants, and Defendant Chad T. Pratt concede their authenticity, but the Court will not make other admissibility rulings. The Court accordingly grants in part and denies in part the Unavailability Motion, grants in part and denies in part the Bank Records Motion, and overrules the Objection.

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[, 12 C.F.R. § 1015 ("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, P.C. and Erikson M. Davis,² of the Parwatikar Defendants, and of 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. Complaint ¶ 34, at 8.

Real Estate Law provides "legal representation, mortgage foreclosure consulting and mortgage modification services to homeowners in New Mexico although RELC [ (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).

PROCEDURAL BACKGROUND

New Mexico alleges 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 other Defendants' 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 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,...