Case Name: Antonio Ocegueda, et al. vs. Ken Nathanson, et al.
Case No.: 1-11-CV-202525

This is a putative class action by plaintiffs Antonio Ocegueda, Ines Ocegueda, Jorge Orejel, Gricelda Garcia, and Judy Jones (“Plaintiffs”) on behalf of themselves and other individuals who allegedly entered into contracts with defendants Ken Nathanson (“Nathanson”), Sherman & Nathanson, P.C., the Nathanson Law Center (collectively the “Nathanson Defendants”), and American Brother Corporation (“ABC”) d/b/a RewireMyLoan.com and its owner Adeel Amin (“Amin”) (collectively the “Rewire Defendants”) for loan modification services and did not receive the services or promised funds. The First Amended Class Action Complaint (“FACAC”) alleges that the Rewire and Nathanson Defendants used real estate brokers and others to recruit and identify victim homeowners and solicited their interest in purported loan modification services. The FACAC also names defendants The Gallant Group (“Gallant”), Eric De Blasi (“De Blasi”), TMG Financial Services, Inc. (“TMG”), and Troy Holland (“Holland”), who allegedly worked with ABC and/or Amin. The FACAC asserts five causes of action for: (1) breach of contract (corporate guaranty) (against Amin, De Blasi, Holland, TMG, and the Rewire Defendants; on behalf of all Class Members); (2) unfair competition – corporate guaranty (Bus. & Prof. Code, § 17200) (against Amin, De Blasi, Holland, TMG, and the Rewire Defendants; on behalf of all Class Members); (3) unfair competition – failure to translate attorney fee agreement (against Amin, De Blasi, Holland, TMG, and Rewire Defendants; on behalf of 1632 Subclass Members); (4) unfair competition – false advertising (against Amin, De Blasi, Holland, TMG, and Rewire Defendants; on behalf of all Class Members); (5) fraud (against Amin, De Blasi, Holland, TMG and Rewire Defendants; on behalf of all Class Members).

Before the Court now are twelve motions.

1. Amin and Brown’s Motion to Tax

This motion arises out of prior discovery matters that resulted in two awards of monetary sanctions against Amin and his counsel, Gary Brown. Amin and Brown appealed the sanctions orders, but on June 12, 2013, the Court of Appeal granted Plaintiffs’ motion to dismiss the appeal and also granted Plaintiffs’ request for sanctions against Amin and Brown.

On September 23, 2013, Plaintiffs filed a memorandum of costs on appeal seeking $390.00 in filing fees, $48.51 in costs of transmission and filing of record, briefs and other papers, and $31,435.50 in attorney’s fees under California Rules of Court, rule 8.278(d)(2).

Amin and Brown move to tax these costs, arguing that Plaintiffs’ memorandum of costs on appeal is not supported by competent evidence and does comply with the business records exception to the hearsay rule. Amin and Brown also argue that the subject of the appeal was too simple to justify the costs sought, and the billing rate being sought is unreasonably high.

On a motion to strike or tax costs, the party seeking costs need only submit a memorandum of costs with a statement by the attorney verifying that the costs claimed are correct and were necessarily incurred in the case. The party need not attach copies of bills, invoices, and so forth. (Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1267.) “[T]he verified memorandum of costs is prima facie evidence of their propriety, and the burden is on the party seeking to tax costs to show they were not reasonable or necessary.” (Jones, supra, 63 Cal.App.4th at p. 1266.) “Once costs claimed in the memorandum are challenged via a motion to tax, ‘[d]ocumentation must be submitted’ to sustain the burden.” (Id. at p. 1265.) Thus, Amin and Brown’s hearsay challenge to the memorandum of costs is not well-taken. Amin and Brown do not submit documentation to sustain their burden that the claimed costs were unreasonable or unnecessary.

However, given that the costs claimed here are almost entirely attorney’s fees, a lodestar analysis is warranted, since the lodestar method of calculating reasonable fee awards is the “starting point of every fee award[.]” (See Serrano v. Priest (Serrano III) (1977) 20 Cal.3d 25, 48 n.23.) Plaintiffs’ papers supporting their memorandum of costs provided evidence regarding the time spent and the billing rates for the attorneys working on the appeal. Plaintiffs also provided evidence that the hourly rates used are comparable to rates charged by other firms in the same region for attorneys with similar qualifications and experience. Plaintiffs’ counsel further explained that the only hours for which fees were sought were those spent by partners reviewing and editing the draft motion, and for associate time spent on researching and drafting the motion to dismiss. In opposition to the motion to tax, Plaintiffs submit further evidence regarding the work performed by Linda H. Mullenbach, senior counsel for the Fair Housing and Fair Lending Project of the Lawyers’ Committee for Civil Rights Under Law, and James Zahradka of the Law Foundation of Silicon Valley.

However, Amin and Brown’s point is well taken that the amount of fees requested for a single motion to dismiss in the Court of Appeal appears excessive. Plaintiffs did not submit detailed time sheets. “California case law permits fee awards in the absence of detailed time sheets. [Citations.] An experienced trial judge is in a position to assess the value of the professional services rendered in his or her court. [Citation.]” (Wershaba v. Apple Computer, Inc. (2001) 91 Cal.App.4th. 224, 255.) Here, because the instant motion seeks fees in connection with services rendered in another court, this Court is not in the same position to assess the value of the services provided from these papers alone.

The matter is taken under submission. Within 10 days, Plaintiffs’ counsel may submit their time records for in camera review so that the Court may better assess the reasonableness of the fee request.

2. Gallant and ABC’s Motion for Relief from Default and Request for Monetary Sanctions Against Plaintiffs’ Counsel

ABC and Gallant move for relief from default. ABC argues it was not properly served because when service was attempted in Colorado in April of 2013, the summons and FACAC identified ABC as “a California corporation” and when Plaintiffs later amended the FACAC’s caption, they did not obtain a corrected summons or serve the amendment to the FACAC on ABC. Gallant argues that at the time it was served with the FACAC and summons in August of 2013, it was suspended for failure to pay taxes but was in the process of obtaining reinstatement. Gallant contends that Plaintiffs were informed of this but decided to pursue the default despite being asked to wait a reasonable time. Gallant submits that it obtained revivor on October 24, 2013, the same day that default was entered against it. ABC and Gallant seek reimbursement of $9,000 in legal fees from Plaintiffs under California Code of Civil Procedure section 128.7 based on their submission of a “false proof of service” on ABC and “a surreptitious use of the default process against” Gallant.

“The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect.” (Cal. Code Civ. Proc., § 473, subd. (b).) “The court may, … on motion of either party after notice to the other party, set aside any void judgment or order.” (Cal. Code Civ. Proc., § 473, subd. (d).) “A judgment may be void due to improper service of summons [citation] or entry of default without proper service of a statement of damages [citation].” (Sakaguchi v. Sakaguchi (2009) 173 Cal.App.4th 852, 858.) “‘[C]ompliance with the statutory procedures for service of process is essential to establish personal jurisdiction. [Citation.] Thus, a default judgment entered against a defendant who was not served with a summons in the manner prescribed by statute is void.’ [Citation.]” (Ibid.)

“A summons may be served on a corporation by delivering a copy of the summons and the complaint by any of the following methods: [¶] (a) To the person designated as agent for service of process as provided by any provision in Section 202, 1502, 2105, or 2107 of the Corporations Code… . [¶] (b) To the president, chief executive officer, or other head of the corporation, a vice president, a secretary or assistant secretary, a treasurer or assistant treasurer, a controller or chief financial officer, a general manager, or a person authorized by the corporation to receive service of process.” (Cal. Code Civ. Proc., § 416.10, subds. (a), (b).)

Plaintiffs demonstrate that they served ABC by service on Amin on June 30, 2011. According to Plaintiffs, on July 6, 2011, Brown told Plaintiffs’ counsel that he was retained “to represent both [Amin] and American Brother Corp., d.b.a. ReWireMyLoan.com” and acknowledged receiving a copy of the Complaint. (Brown later took the inconsistent position that he did “not represent American Brother Corporation.”) Amin identified himself as the “Owner” of ABC in ABC’s Fictitious Business Name Statement. As ABC’s owner, Amin had ostensible authority to accept service on ABC’s behalf for purposes of section 416.10 subdivision (b). (See Gibble v. Car-Lene Research, Inc. (1998) 67 Cal.App.4th 295, 302-303.) Even if the original Complaint that was served on Amin on behalf of ABC mistakenly described ABC as “a California corporation,” such a misnomer does not invalidate proper service. (See Thompson v. Southern Pacific Co. (1919) 180 Cal. 730, 731-734.) “[I]f the service is otherwise properly made, and the person served is aware that he is the person named as a defendant in the erroneous manner, jurisdiction is obtained.” (Sakaguchi, supra, 173 Cal.App.4th at p. 857, internal quotation marks and citations omitted.) Here, despite the misnomer regarding ABC, Brown’s July 6, 2011 letter acknowledged that ABC was aware it was the defendant named in the original Complaint.

Thereafter, Plaintiffs’ amended the original Complaint by filing the FACAC and an amended summons. The amended summons listed ABC as “a California Corporation d/b/a/ REWIREMYLOAN.COM[.]” According to Plaintiffs, the Articles of Incorporation for ABC obtained from the Colorado Secretary of State’s office indicated that National Registered Agents, Inc. was the registered agent for service of process of ABC, but an agent for National Registered Agents told the process server that CT Corporation was the authorized agent to accept service. According to the Declaration of Diligence filed by the process server, “CT Corporation verified they were authorized to accept service.” The FACAC was served on Lori Gray from CT Corporation on April 30, 2013. ABC does not dispute that CT Corporation was authorized to accept service on its behalf. ABC only challenges the same misnomer of “a California corporation” found on the FACAC’s caption and in the amended summons, but as discussed above, this misnomer does not invalidate otherwise proper service.

Because ABC fails to demonstrate that service was improper, ABC’s motion for relief from default is DENIED.

Gallant does not dispute that Brown was authorized to accept service on Gallant’s behalf. Instead, Gallant argues that Plaintiffs should have waited to obtain entry of default while Gallant was working to revive its suspended status. A corporation’s powers, rights and privileges may be suspended for non-payment of taxes, penalties and interest that are due and payable. (See Cal. Rev. & Tax Code, § 23301.) “[D]uring the period a corporation’s powers, rights and privileges are suspended or forfeited, it may not sue or defend an action[.]” (Schwartz v. Magyar House, Inc. (1959) 168 Cal.App.2d 182, 188.)

Gallant argues the situation here should have been handled as in Schwartz. However, unlike the corporations in Schwartz, Gallant did not ask the Court prior to entry of default for a continuance or extension of its time to respond to the FACAC pending revivor. Nor does Gallant demonstrate that its failure to request a continuance or extension prior to entry of default was due to mistake, inadvertence, surprise, or excusable neglect. Plaintiffs were not obligated to refrain from requesting default while Gallant was attempting revival. (Gibble, supra, 67 Cal.App.4th at p. 311.)

Gallant argues that it was the Franchise Tax Board’s slow process that entitles Gallant to relief from default. However, Amin admits that “Gallant had been inactive for over four years” by the time revivor was commenced in July of 2013. Amin, Gallant’s CEO, was served in April of 2013 with the FACAC naming Gallant as a defendant, but did not commence the reinstatement process until July. The Franchise Tax Board is not to blame for Gallant’s own dilatory conduct, and Gallant should not be rewarded for its longstanding failure to attend to its tax obligations.

Because Gallant fails to demonstrate mistake, inadvertence, surprise, or excusable neglect, Gallant’s motion for relief from default is DENIED.

ABC and Gallant request sanctions of $9,000 under California Code of Civil Procedure section 128.7 against Plaintiffs’ counsel for filing a “false” proof of service upon ABC and for their “surreptitious use of the default process” against Gallant. However, a request for sanctions under section 128.7 must be made in “[a] motion…made separately from other motions or requests[.]” (Cal. Code Civ. Proc., § 128.7, subd. (c)(1).) Furthermore, under section 128.7’s “safe harbor”, the motion for sanctions cannot be filed until 21 days after it is served to allow the party against whom sanctions is sought an opportunity to correct the challenged paper. (Ibid.) ABC and Gallant’s request for section 128.7 sanctions is DENIED.

3. Plaintiffs’ Motion for Default Judgments Against Holland, TMG, ABC and Gallant

Plaintiffs move for default judgment against defendants Holland, TMG, ABC and Gallant.

Plaintiffs submit that on August 3, 2013, they personally served the FACAC and Statement of Damages on Holland and TMG. On September 19, 2013, the Court entered the defaults of Holland and TMG. The facts and circumstances regarding service and default of ABC and Gallant are discussed above. ABC’s default was entered on October 9, 2013, and Gallant’s default was entered on October 24, 2013.

Plaintiffs submit a Judicial Council Form CIV-100 for Holland, TMG, ABC and Gallant requesting a court judgment and total damages of $1,243,901. Plaintiffs also request $300,000 in punitive damages, as specified in Plaintiffs’ Statement of Damages. Plaintiffs submit Proofs of Service of the Statements of Damages served on the defaulting defendants.

The action arises out of a statewide network of individuals and entities that took advantage of homeowners fearful of losing their homes to foreclosure by promising to assist them with loan modification services through a sham front called RewireMyLoan.com. Plaintiffs allege that RewireMyLoan directed victims to Nathanson, a licensed but currently suspended attorney, taking a cut off the top of the homeowners’ upfront fees. RewireMyLoan.com guaranteed to refund the homeowners’ payments should Nathanson fail to acquire loan modification, but failed to deliver on its promises, and no refunds were made. ABC is a Colorado corporation doing business in California under the fictitious business name of RewireMyLoan.com. Gallant is a California corporation also doing business under the fictitious business name of RewireMyLoan.com. Amin is the owner and CEO of ABC and Gallant. TMG is a California corporation maintaining a principal place of business in Martinez, California and is owned by Holland. TMG worked in concert with and/or as an agent of ABC in soliciting and obtaining clients. Plaintiffs that Holland directed the work of TMG in working in concert with and/or as an agent of ABC, and, on information and belief, acted as decision-maker working in concert with Amin and/or De Blasi to direct the activities of the RewireMyLoan Entities as its “Director of National Training.”

ABC, Gallant, Holland and TMG (the “Rewire Defendants”) allegedly used a number of real estate brokers who had close relationships with their local communities to recruit and identify homeowners and solicit their interest in the loan modification services. One of the referring agents was Robert Aldana, a Spanish-language radio personality and licensed real estate agent based in San Jose who solicited homeowners on his radio show and began the negotiations that led victims to RewireMyLoan.com. Meetings were conducted in Spanish, and Mr. Aldana’s staff collected the homeowners’ personal and financial information and informed them that they would get a loan modification through Nathanson or their money back. They were presented with English-language contracts with the Rewire Defendants and were instructed to sign them. These victims did not receive Spanish-language translations of their contract documents. Plaintiffs allege on information and belief that the Rewire Defendants authorized Mr. Aldana to present these contracts to consumers and paid referral fees to Mr. Aldana. The brokers and agents in the referral network promoted Nathanson’s loan modification services by stating that they included litigation against the bank, making them superior to standard loan modification services and making representations about the results that Nathanson could achieve, including interest rate and principal balance reductions. These promises were backed by a contractual money-back guarantee by the Rewire Defendants.

The Rewire Defendants or individuals authorized to act on their behalf presented form contracts for the victims to sign, including the Attorney-Client Fee Agreement entered into between the victims and the Nathanson Defendants. The Attorney-Client Fee Agreement included provisions for the victims to make an upfront payment in exchange for a “loan modification package.” These upfront fees ranged from $2,975.00 to $4,995.00 per property. All of the victims received a “Corporate Guaranty” from the Rewire Defendants that provided that Rewire would serve as Guarantor on behalf of the Nathanson Defendants. There were two versions of the Corporate Guaranty. One version was provided as a “material inducement” to enter into the Attorney-Client Agreement, and “absolutely, presently, continually, unconditionally, and irrevocably guarantees the refund to Guaranteed Party of the entire amount charged by Guaranteed Party by Sherman & Nathanson, a Professional corporation (S&N) in the event S&N fails to provide the services that S&N promises to perform pursuant to said Attorney-Client Agreement.” The other version of the Corporate Guaranty stated that the refund would be provided if Nathanson’s services “do not result in an offer of more favorable loan terms (as defined in the Fee Agreement) from Guaranteed Party’s home lender.”

Plaintiffs allege that victims made their payments directly to Nathanson, who then paid the Rewire Defendants and provided referral fees to brokers and/or other agents in the referral network. Plaintiffs allege on information and belief that after the Rewire Defendants received the payments, they did not substantially perform the promised services and did little, if anything, for each victim, and did not communicate with them regarding the status of their mortgage modifications. The victims received little or none of the results that were guaranteed, and few, if any, received the promised litigation services. Few victims, if any, received any promised loan modification at all, let alone significant reductions in interest rates and/or principal amounts guaranteed by the defendants. Moreover, the Rewire Defendants did not provide the guaranteed refunds to the victims, despite receiving requests to do so by victims. When the Rewire Defendants became aware of multiple refund demands, they expressed a desire to avoid paying any refunds by, among other tactics, seeking to renegotiate their Corporate Guaranty with the victims. Plaintiffs allege on information and belief that the Rewire Defendants conspired and acted in concert and/or as agents with the others to develop the plan to offer money-back guarantees as a material inducement for victims to enter into the agreements, with no intention of actually honoring the Guaranty. Plaintiffs allege that Rewire was not adequately capitalized to operate its business and was dominated by Amin, De Blasi and Holland, who did not intend for RewireMyLoan.com to honor its guarantees in good faith. Plaintiffs allege that Rewire was an alter ego of Amin, De Blasi and Holland.

In the first cause of action for breach of contract, Plaintiffs allege the Rewire Defendants breached the Corporate Guaranty by failing to provide the promised money-back guaranty. In the second cause of action for unfair competition under California Business & Professions Code section 17200 (the “Unfair Competition Law” or “UCL”), Plaintiffs allege that the Rewire Defendants engaged in unlawful, unfair and fraudulent business practices by using the Corporate Guaranty as a material inducement for class members to enter into contracts with the defendants and failing to provide the promised money-back guarantee after the Nathanson Defendants failed to perform the promised loan modification services. In the third cause of action for violation of the UCL, Plaintiffs allege that the Rewire Defendants, acting as the Nathanson Defendants’ agents in negotiating with the 1632 Subclass Members, engaged in unlawful, unfair and fraudulent business practices in violation of California Civil Code section 1632 subdivision (b)(6) by failing to deliver to the 1632 Subclass Members a translation of the Attorney-Client Agreements in the language in which the agreements were negotiated. In the fourth cause of action for violation of the UCL, Plaintiffs allege that the Rewire Defendants made false and/or deceptive representations regarding the “guaranteed” loan modification and/or litigation services through channels including oral representations, the Internet, radio, and form contracts. In the fifth cause of action for fraud, Plaintiffs allege that Amin, on behalf of Rewire, falsely represented to each Class Member through the Corporate Guaranty that each Class Member would receive the return of their upfront payments in the event the Defendants were unable to secure a loan modification for the Class Member or the Nathanson Defendants failed to provide the services they promised to perform pursuant to the Attorney-Client Agreement. Plaintiffs allege on information and belief that Amin knew the representation was false when made because Amin did not intend to provide the promised refunds, and/or he made the representation recklessly and without regard for its truth. Plaintiffs allege the Class Members reasonably relied on Amin’s representations by entering into the Attorney-Client Agreement and were harmed by the loss of their upfront payments. Plaintiffs allege that Holland, De Blasi and TMG were agents of Rewire and knew of and participated in the making of the fraudulent representations set forth in the Corporate Guaranty, and therefore are liable for Rewire’s fraudulent acts as well. Plaintiffs allege that Holland, De Blasi and TMG were co-conspirators of Amin and Rewire because they knew of and participated in the making of the fraudulent representations set forth in the Corporate Guaranty and agreed with and allowed Amin and Rewire to make these fraudulent representations to Class Members through the Corporate Guaranty so as to individually benefit from the conspiracy.

Plaintiffs submit documents produced by Randal Moos, an early participant in Gallant to establish that Amin and De Blasi launched Rewire in January 2009 as a “cash on cash” division of Gallant. Plaintiffs demonstrate the interconnectedness between Amin, Gallant and ABC with regard to Rewire, including the fact that Rewire managed its finances using Gallant’s and ABC’s bank accounts, to establish that Rewire was an alter ego of Gallant and ABC. Plaintiffs further submit evidence regarding Rewire’s partnership with the Nathanson Defendants and Rewire’s promised loan modification services and benefits in marketing documents that contained false testimonials and on a variety of media including television, a blog, and on the radio.

Regarding the referral network, Plaintiffs submit that Rewire developed a statewide referral network of “Net Branches” and local real estate agents to promote its services. Rewire paid its Net Branches a referral fee from its gross profit from each homeowners’ upfront fee. Holland and TMG entered into a “Net Branch Agreement” with Gallant on January 16, 2009 and eventually solicited more than 70 homeowners. Plaintiffs submit email documents and the deposition testimony of Aldana to prove that Holland acted as “Director of Training” in recruiting Net Branches and referral agents to make sure that Rewire’s loan modification promises and “money back guarantee” were disseminated through them, and made a presentation at Aldana’s San Jose office to a group of realtors regarding Rewire’s services and Amin’s business successes.

Plaintiffs submit evidence of Rewire’s “intake” process, which Plaintiffs contend was a sham prequalification process in that no homeowners were ever declined. During the intake process, Rewire had homeowners sign the Attorney-Client Agreement and Corporate Guaranty. Plaintiffs contend that false representations were made during the intake process regarding Nathanson’s services, principal reductions and interest rate deductions.

Plaintiffs further submit that the Rewire Defendants targeted non-English speakers through Aldana’s radio program, in which Aldana and another referring agent Patricia Torres Lowe, broadcast Rewire’s promises to their Spanish-speaking audience nearly verbatim. The Rewire message was also disseminated through Aldana’s multiple Spanish-language workshops attended by 60-80 homeowners at a time. Although Nathanson translated the Attorney-Client Agreement into Spanish and sent it to Amin, the Rewire Defendants never provided homeowners with this or any other non-English translation of the Attorney-Client Agreement or Rewire’s Corporate Guarantees.

Plaintiffs submit email communications between Defendants to demonstrate that the promised loan modification services were not provided. Plaintiffs submit deposition testimony from Aldana and Lowe to demonstrate that the Rewire Defendants were inundated with complaints, but Rewire did nothing with many homeowners’ files and generally ignored requests for information or gave homeowners inconsistent information. At least 250 homeowners made upfront payments but received no loan modification options or their money back. Plaintiffs contend that Rewire never intended to provide the guaranteed benefits by submitting email communications between the defendants and testimony from Aldana regarding a statement by Amin that “we just don’t have time right now to give these people their refunds” because “I deal with much bigger business projects, and Rewire…doesn’t mean a whole lot to me.” On another occasion, Amin wrote that he was “not in the mood” to honor refund requests. Plaintiffs submit that Rewire never set up financial reserves to provide for refund payments as evidence of the Rewire Defendants’ intent not to honor their guarantee.

Plaintiffs contend the Rewire Defendants profited from this scheme, as demonstrated by the fact that Nathanson transferred at least $800,000 to ABC and Gallant in 2009, and Gallant and ABC then paid 40 to 60 percent of the remaining balance to TMG (or $500-$600 per files to Aldana) and kept the rest.

With regard to the first cause of action for breach of contract, the Corporate Guaranty, which is the basis for the cause of action, was entered into between the clients and RewireMyLoan.com as Guarantor. Plaintiffs’ evidence, if credited, would establish that RewireMyLoan.com was an alter ego of Gallant and ABC. However, because Holland and TMG are not parties to the Corporate Guaranty, they cannot be liable for breach of this contract, and there is no evidence that RewireMyLoan.com was an alter ego of Holland and TMG. Thus, Plaintiffs fail to establish a prima facie case of breach of contract against Holland and TMG. As for Gallant and ABC, the evidence supports that RewireMyLoan was their alter ego, and that RewireMyLoan.com breached its promises under the Corporate Guaranty for at least 250 homeowners.

With regard to the second cause of action for violation of the UCL based on the use of the Corporate Guaranty as a material inducement to enter into contracts with the defendants and failing to provide the promised money-back guarantee, Plaintiffs’ evidence does not support a prima facie case against Holland and TMG. The evidence demonstrates that TMG was an independent contractor working for Gallant under a Net Branch Agreement. It is not clear how TMG and its owner Holland would, as independent contractors retained to solicit homeowners in return for a referral fee, be responsible for RewireMyLoan.com’s failure to provide refunds to loan modification customers. To the extent liability under the second cause of action is based on allegations that Holland and TMG knew of and participated in the making of the fraudulent representations set forth in the Corporate Guaranty, none of the evidence supports TMG and Holland’s knowledge that RewireMyLoan.com did not intend to honor the guarantees. Nor does the evidence support the conspiracy allegations that Holland and TMG knew of the fraudulent nature of the representations set forth in the Corporate Guaranty in order to benefit from the conspiracy. Plaintiffs’ evidence that TMG entered into a Net Branch Agreement with Gallant and that Holland and TMG recruited realtors in the Net Branch network and instructed them to relay RewireMyLoan.com’s promises and money-back guarantee does not support a prima facie case that Holland and TMG knew these promises were false and were using the Corporate Guaranty as a false or unfair inducement. Plaintiffs’ evidence that RewireMyLoan.com did not set up financial reserves is not attributable to Holland and TMG. While Plaintiffs’ evidence includes email communications between Amin and Nathanson in which Amin makes accusations against Holland and TMG, a motion for default judgment must be supported by “[d]eclarations or other admissible evidence in support of the judgment requested” (Cal. Rules of Court, rule 3.1800(a)(2), emphasis added), and Amin’s statements about Holland and TMG are inadmissible hearsay. While Plaintiffs’ evidence also appears to include some of Holland’s emails in which he made promises regarding RewireMyLoan.com’s loan modification services, this evidence does not pertain to the Corporate Guaranty or demonstrate Holland’s and TMG’s knowledge that RewireMyLoan.com did not intended to honor the money-back guarantees.

As for Gallant and ABC, because Plaintiffs’ evidence supports that RewireMyLoan.com was the alter ego of Gallant and ABC, the evidence supports liability against Gallant and ABC for violation of the UCL. The evidence establishes that RewireMyLoan.com provided the Corporate Guaranty as an inducement to enter into contracts for loan modification services but did not honor the money-back guarantees. The evidence also supports the inference that RewireMyLoan.com did not intend to honor the money-back guarantees.

The above analysis regarding the second cause of action also applies to the fifth cause of action for fraud, which arises out of the misrepresentations of Amin (CEO and owner of ABC and Gallant) through the Corporate Guaranty regarding guaranteed refunds.

With regard to the third cause of action for violation of the UCL based on the failure to provide translations to the 1632 Subclass Members, the allegation is that the Rewire Defendants acted as the Nathanson Defendants’ agents in negotiating with the 1632 Subclass Members. However, the evidence does not support a prima facie case that Holland and TMG acted in such an agency capacity with regard to the 1632 Subclass Members. There is no evidence of intake activity or negotiations by Holland and TMG with 1632 Subclass Members. While Plaintiffs’ evidence links Holland and TMG with Aldana in an effort to recruit more Net Branch members for Gallant, this does not support liability against Holland and TMG for the failure of Aldana or his staffers to provide translated documents under Civil Code section 1632.

However, because Plaintiffs’ evidence supports that RewireMyLoan.com was the alter ego of Gallant and ABC, the evidence supports UCL liability against Gallant and ABC for violation of Civil Code section 1632 subdivision (b) during RewireMyLoan.com’s intake process.

The second cause of action contains an allegation that is repeated verbatim as the basis for the fourth cause of action. This is essentially a false advertising claim in which Plaintiffs allege that the Rewire Defendants violated the UCL by making false and/or deceptive representations regarding the “guaranteed” loan modification and/or litigation services through channels including oral representations, the Internet, radio, and form contracts.

The UCL and the false advertising law “prohibit ‘not only advertising which is false, but also advertising which[,] although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public.’ [Citation.] Thus, to state a claim under either the UCL or the false advertising law, based on false advertising or promotional practices, ‘it is necessary only to show that “members of the public are likely to be deceived.”’ [Citations.]” [Citation.] This is determined by considering a reasonable consumer who is neither the most vigilant and suspicious of advertising claims nor the most unwary and unsophisticated, but instead is “the ordinary consumer within the target population.” [Citation.] “‘Likely to deceive’ implies more than a mere possibility that the advertisement might conceivably be misunderstood by some few consumers viewing it in an unreasonable manner. Rather, the phrase indicates that the ad is such that it is probable that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” [Citation.]

(Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 226-227.)

Plaintiffs’ evidence includes statements made in RewireMyLoan.com’s blog and on the Internet, as well as marketing documents toting RewireMyLoan.com’s “98% Success Rate”, claims to “do it for free!”, and testimonials that Plaintiffs suggest are false. The websites for Rewire claimed that “our company will never collect any money from you upfront or ‘on the back.’ We are a 100% FREE service to homeowners.” Plaintiffs submit that these false representations were made on the Internet, television, and on the radio in English and Spanish. The evidence supports a prima facie case of likely deception to an ordinary customer, particularly with regard to the claim that RewireMyLoan.com does not collect upfront fees and provides a “free” loan modification service. However, while these advertisements are attributable to Gallant and ABC through the alter ego allegations, they are not attributable to Holland and TMG.

Regarding remedies, Plaintiffs demonstrate they are entitled to compensatory damages and restitution from Gallant and ABC’s breaches of the Corporate Guaranty in the amount of the collected upfront fees for which no loan modification services were provided. Plaintiffs submit that the aggregate compensatory damages the Class is owed is $951,710.00, which is supported by Plaintiffs’ counsel’s review of Nathanson’s Master Spreadsheet. Plaintiffs also demonstrate they are entitled to punitive damages from Gallant and ABC based on their fraud.

Plaintiffs request $300,000 in punitive damages, which is the amount specified in Plaintiffs’ Statement of Damages. The Court will take the request for punitive damages under submission. Within 10 days, Plaintiffs may submit evidence on the financial conditions of Gallant and Amin for the Court’s consideration in awarding punitive damages.

Plaintiffs submit that the Corporate Guaranty contains an attorney’s fee provision that awards attorney’s fees to the prevailing party “[i]n the event of any dispute or litigation regarding the enforcement of validity of this Guaranty[.]” The FACAC seeks attorney’s fees in the first cause of action, and the language of the Corporate Guaranty provides a prima facie basis for the award of attorney’s fees. Plaintiffs request an attorney’s fees award of $15,117 based on this Court’s fee schedule for default judgments. (See Local Civ. Rule 13.)

Plaintiffs also seek pre-judgment interest at the rate of 10% per annum after breach. For ABC, interest accrues as of the date of the original filing of this action (June 8, 2011), and for Gallant, interest accrues as of the date of the filing of the FACAC (April 2, 2013). Plaintiffs request pre-judgment interest in the amount of $261,968 from ABC and $86,085 from Gallant.

The Court will award attorney’s fees and prejudgment interest against ABC and Gallant as requested.

The motion for default judgment is GRANTED as to Gallant and ABC and DENIED WITHOUT PREJUDICE as to Holland and TMG. The request for punitive damages will be taken under submission pending evidence of Gallant and ABC’s financial condition.

4. Plaintiffs’ Motion for Class Certification and Appointment of Class Counsel

Plaintiffs move to certify the following “Main Class”:

All individuals residing in California who, between February 1, 2009 and June 8, 2011, (1) entered into contracts for loan modification services with Ken Nathanson, Nathanson Law Center, Sherman & Nathanson, P.C., and/or Defendants Adeel Amin, American Brother Corporation, Inc., Gallant Group, Ltd., Eric DeBlasi, Troy Holland, and/or TMG Financial Services, Inc.; (2) paid advance fees for those loan modification services; (3) were not provided with the loan modification services promised; and (4) did not receive promised refunds.

The Main Class alleges four claims: (1) breach of contract by failing to provide the refunds promised in the Corporate Guaranty; (2) unfair competition by breaching the Corporate Guaranty and/or acting unfairly against the Class Members in violation of BPC 17200; (3) unfair competition/false advertising regarding “guaranteed” loan modification and/or litigation services; and (4) fraud for promising a money-back guarantee.

Plaintiffs also move to certify the following “1632 Subclass”:

All Main Class Members who negotiated primarily with the Defendants in Spanish, Chinese, Tagalog, Vietnamese, or Korean, but did not receive a translation of very term and condition of the written agreements with Defendants prior to execution of the agreements.

The 1632 Subclass alleges one claim for failure to translate written agreements, in violation of California Civil Code section 1632 and Business & Professions Code section 17200.

Plaintiffs also seek appointment of their attorneys as class counsel and approval of the Class notice.

The motion is not opposed.

California Code of Civil Procedure section 382 authorizes class actions “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.”

The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] The “community of interest” requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.]

The certification question is “essentially a procedural one that does not ask whether an action is legally or factually meritorious.” [Citation.] A trial court ruling on a certification motion determines “whether…the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.” [Citation.]

(Sav-On, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)

“Whether a class is ascertainable is determined by examining (1) the class definition, (2) the size of the class, and (3) the means available for identifying class members. [Citations.]” (Reyes v. San Diego County Board of Supervisors (1987) 196 Cal.App.3d 1263, 1271.) “In attempting to define an ascertainable class, the goal is to use terminology that will convey ‘sufficient meaning to enable persons hearing it to determine whether they are members of the class plaintiffs wish to represent.’ [Citation.] ‘Ascertainability…goes to the heart of the question of class certification, which requires a class definition that is ‘precise, objective and presently ascertainable.’ [Citation.]” (Global Minerals & Metal Corp. v. Superior Court (2003) 113 Cal.App.4th 836, 858.)

Here, the Main Class and 1632 Subclass are ascertainable from contract documents. Plaintiffs submit that they have already identified the Main Class, and the 1632 Subclass is ascertainable from documents produced by the Nathanson Defendants identifying the Spanish-speaking members of the Main Class. The proposed class definitions are sufficiently objective to enable consumers to know if they are part of the class.

“A class action is proper when the parties are numerous and it is impracticable to bring them all before the court.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) Here, Plaintiffs submit the Main Class includes approximately 250 homeowners, and among them are approximately 60 1632 Subclass members. Joinder of this many individuals would be impracticable.

In order to demonstrate that questions of law or fact common to the class predominate over questions affecting the individual members, “each member must not be required to individually litigate numerous and substantial questions to determine his [or her] right to recover following the class judgment[.]” (Washington Mut. Bank FA v. Superior Court (Briseno) (2001) 24 Cal.4th 906, 913-914 [internal citations and quotation marks omitted].) As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages. In order to determine whether common questions of fact predominate, the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged. (Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916.) “In examining whether common issues of law or fact predominate, the court must consider the plaintiff’s legal theory of liability. [Citation.]” (Walsh v. Ikon Office Solutions, Inc. (2007) 148 Cal.App.4th 1440, 1450.)

Plaintiffs submit that Rewire required all clients to sign the same two form contracts: the Corporate Guaranty and the Attorney-Client Agreement. The Corporate Guaranty allegedly induced the class members to retain former defendant Sherman & Nathanson for the promised loan modification services by guaranteeing a refund if Sherman & Nathanson did not obtain “more favorable loan terms.” Plaintiffs submit that Rewire uniformly instructed its referring agents to tell homeowners that any warranty provisions in the Attorney-Client Agreement were overwritten by the Corporate Guarantee. Plaintiffs further submit that Defendants required all clients to make advance payments for service, but Rewire instructed employees not to process refunds and actively avoided paying them, despite many requests, and Rewire had no financial reserves for refund payments. Plaintiffs submit that Rewire’s marketing materials uniformly indicated that all clients would receive an option for modifying their loan in exchange for a refundable, upfront fee, and Rewire’s television, website, blog, and radio advertisements promised high success rates and used false testimonials. As common evidence of Defendants’ policies and practices, Plaintiffs proffer the testimony of Defendants’ referring agents, the named Plaintiffs, and Rewire’s bookkeeper, Ingal Rymal.

The Court finds that Plaintiffs sufficiently demonstrate that common questions of law and fact will predominate. Plaintiffs’ evidence shows the use of common documents, uniform instructions to referral agents, common marketing materials, and testimony from Rewire employees on its policies and practices. Although there were obviously individualized circumstances regarding each customer’s loans, the theory here is that the guarantees were not intended to be honored, as evidenced by the fact that Rewire had no financial reserves to honor the guarantees.

“The test of typicality ‘is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.’ [Citation.]” (Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.) Plaintiffs submit the declarations of the named Plaintiffs establishing that they are members of the Main Class because they executed the uniform Corporate Guaranty and paid advance fees for loan modification services but received none of the promised services or refunds. Four of the named Plaintiffs (Antonio Ocegueda, Ines Ocegueda, Jorge Orejel, and Gricelda Garcia) are members of the 1632 Subclass who negotiated with the Defendants in Spanish but never received a Spanish translation. The Court finds that the Plaintiffs’ claims are typical of the Main Class and Subclass.

“Adequacy of representation depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class. [Citations.]” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450-451.) Here, Plaintiffs’ declarations establish that their interests are aligned with the Main Class and Subclass. Plaintiffs’ counsel submit declarations supporting their experience and qualifications in complex class litigation.

Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110, 120-121.) Here, the loan modification advance fees at issue are generally small, and as discussed above, there are a number of common issues of law and fact regarding Rewire’s practices that would efficiently address many of these claims in one lawsuit.

For all of these reasons, the motion for class certification and appointment of class counsel is GRANTED.

5. Plaintiffs’ Motion to Seal Exhibits Filed in Support of Plaintiffs’ Motion for Default Judgment Against Holland, et al.

Plaintiffs move to seal exhibits 10, 12, 27, 29, 30, 32-35, 37-48, 67, 68 and 69 to the Declaration of Jacob Heath ISO Plaintiffs’ Motion for Default Judgments.

 Plaintiffs submit that Heath Exhibits 10, 27, 29, 33, 34, 38, 39, 41, 43, 44, 46-48 are email chains produced by Amin and designated Confidential pursuant to the parties’ Stipulated Protective Order.
 Plaintiffs submit that Heath Exhibits 30, 35, 37, 38, 40, 42 and 45 are also email chains produced by Amin and designated Confidential pursuant to the Stipulated Protective Order. Plaintiffs contend these exhibits also contain personal identifying information of putative class members.
 Plaintiffs submit that Heath Exhibit 12 is a copy of the July 22, 2012 Declaration of Ken Nathanson that contains Exhibit A, General Account information that identifies specific payment information for various payees during 2009.
 Plaintiffs submit that Heath Exhibits 67, 68 and 69 are Sherman & Nathanson’s Operating Account II documents that contain bank information for Gallant and ABC and identify specific payments made to various payees during a several month period in 2009.
 Plaintiffs submit that Heath Exhibit 32 is a Master Spreadsheet maintained and produced by Nathanson that contains personal, identifying information of individuals that contracted with the Nathanson Defendants.

“Unless confidentiality is required by law, court records are presumed to be open.” (Cal. Rules of Court, rule 2.550(c).) “A record must not be filed under seal without a court order. The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.” (Cal. Rules of Court, rule 2.551(a).) “The court may order that a record be filed under seal only if it expressly finds facts that establish: [¶] (1) There exists an overriding interest that overcomes the right of public access to the record; [¶] (2) The overriding interest supports sealing the record; [¶] (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; [¶] (4) The proposed sealing is narrowly tailored; and [¶] (5) No less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d).) “Courts have found that, under appropriate circumstances, various statutory privileges, trade secrets, and privacy interests, when properly asserted and not waived, may constitute overriding interests.” (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 298 fn. 3; NBC Subsidiary (KNBC-TV) vs. Superior Court (1999) 20 Cal.4th 1178, 1222, fn. 46.) Where some material within a document warrants sealing, but other material does not, the document should be edited or redacted if possible, to accommodate the moving party’s overriding interest and the strong presumption in favor of public access. (Cal. Rules of Court, rule 2.550(d)(4), (5).) In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis. (Providian, supra, 96 Cal.App.4th at p. 309.)

Plaintiffs only take a position on sealing with regards to Heath Exhibits 12, 30, 32, 35, 37, 38, 40, 42 and 45 on the grounds that they contain personal identifying information of Class members, including names, amounts paid, amounts refunded, and home mortgage information. Plaintiffs take no position with regard to Heath Exhibits 10, 27, 29, 33, 34, 38, 39, 41, 44, 44, 46-48, and 67-69. Plaintiffs merely submit that these exhibits were designated Confidential by Amin.

The motion is CONTINUED to June 27th, 2014 at 9 a.m.

With regard to Heath Exhibits 12, 30, 32, 35, 37, 38, 40, 42 and 45, the request to seal is not narrowly tailored. Within 10 days, Plaintiffs shall submit redacted versions of these exhibits that redact only the personal and sensitive information. With regard to Heath Exhibits 10, 27, 29, 33, 34, 38, 39, 41, 44, 44, 46-48, and 67-69, Plaintiffs moved to seal these exhibits essentially on Amin’s behalf (since he designated them Confidential) but Plaintiffs have not demonstrated that the requirements of the Sealed Records Rules are satisfied as to these exhibits. Plaintiffs should have lodged the documents under seal and given notice to Amin to file a motion to seal pursuant to rule 2.551(b)(3)(A). Amin shall have 10 days from the date of the Court’s final order on this motion to file a motion to seal these exhibits.

6. Plaintiffs’ Motion to Seal Exhibits Filed in Support of Plaintiffs’ Motion for Class Certification

Plaintiffs move to seal Exhibits 9, 11-20, 41 and 42 to the Declaration of Jacob Heath ISO the Motion for Class Certification.

 Plaintiffs submit that Heath Exhibits 9, 11, 12, 13, 14, 16, 17, 19, 20, 41 and 42 are email chains produced by Amin and designated Confidential.
 Plaintiffs submit that Heath Exhibits 14 and 17 are also email chains produced by Amin and designated Confidential, but that they also contain personal identifying information of putative class members.
 Plaintiffs submit that Heath Exhibit 18 is an excerpt from the deposition of Rewire’s bookkeeper, Inga Rymal, taken on July 19, 2013 and designated Confidential pursuant to the Stipulated Protective Order.
 Plaintiffs submit that Heath Exhibit 15 is the Master Spreadsheet maintained and produced by Ken Nathanson that contains personal, identifying information of individuals that contracted with Nathanson.

Plaintiffs take no position with respect to sealing Heath Exhibits 9, 11, 12, 13, 16, 19, 20, 41 and 42. Plaintiffs only support sealing Heath Exhibits 14, 15, 17, and 18 due to their inclusion of personal identifying information of alleged victims and other third parties.

The motion is CONTINUED to June 27, 2014 at 9 a.m.

With regard to Heath Exhibits 14, 15, 17, and 18, the request to seal is not narrowly tailored. Within 10 days, Plaintiffs shall submit redacted versions of these exhibits that redact only the personal and sensitive information. With regard to Heath Exhibits 9, 11, 12, 13, 16, 19, 20, 41 and 42, Amin shall have 10 days from the date of the Court’s final order on this motion to file a motion to seal these exhibits.

7. Plaintiffs’ Motion to Approve Class Notice

“If the class is certified, the court may require either party to notify the class of the action in the manner specified by the court.” (Cal. Rules of Court, rule 3.766(a).) “The class proponent must submit a statement regarding class notice and a proposed notice to class members. The statement must include the following items: (1) Whether notice is necessary; (2) Whether class members may exclude themselves from the action;
(3) The time and manner in which notice should be given; (4) A proposal for which parties should bear the costs of notice; and, (5) If cost shifting or sharing is proposed under subdivision (4), an estimate of the cost involved in giving notice.” (Id., subd. (b).)

“Upon certification of a class, or as soon thereafter as practicable, the court must make an order determining:
(1) Whether notice to class members is necessary;
(2) Whether class members may exclude themselves from the action;
(3) The time and manner of notice;
(4) The content of the notice; and
(5) The parties responsible for the cost of notice.”

(Cal. Rules of Court, rule 3.766(c).) Here, notice is necessary to inform the approximately 250 Class members of the existence of the litigation. Since some Class members may have large individual stakes, they should be given the right to exclude themselves from the action. Regarding the time and manner of notice, Plaintiffs propose a 30-day opt-out period. However, a longer period of 60 days is more appropriate to ensure that all of the Class members receive notice and have time to consider whether to remain in the Class.

Plaintiffs propose that notice be given first by direct mailing of the Class Notice, Opt-Out Form, and 1632 Inquiry Form in Spanish and English to the last known address that Plaintiffs’ counsel could identify from their investigation of Defendants’ records. Plaintiffs have already conducted a public records search on undeliverable addresses and have located updated addresses for all but four. Plaintiffs further propose that notice also be given by publication of the forms on the websites of Plaintiffs’ counsel. Plaintiffs propose that costs be paid by Defendants.

The interests of the Class are well-served by Plaintiffs’ proposed notice procedures, which provide for both direct mailing and publication notice. The Court finds the proposed notice procedures to be reasonably calculated to provide notice to the Class. However, the costs of notice are to be shared equally by both parties.

“The content of the class notice is subject to court approval. If class members are to be given the right to request exclusion from the class, the notice must include the following:
(1) A brief explanation of the case, including the basic contentions or denials of the parties;
(2) A statement that the court will exclude the member from the class if the member so requests by a specified date;
(3) A procedure for the member to follow in requesting exclusion from the class;
(4) A statement that the judgment, whether favorable or not, will bind all members who do not request exclusion; and
(5) A statement that any member who does not request exclusion may, if the member so desires, enter an appearance through counsel.

(Cal. Rules of Court, rule 3.766(d).) Here, Plaintiffs submit copies of the Notice of Pendency of Class Action, an Opt-Out Form, and an Inquiry Regarding Class Action form. The Notice conforms to the requirements of rule 3.766(d).

The motion to approve Class Notice is GRANTED, subject to the following modifications: (1) the opt-out period shall be 60 days from the date of mailing of the Notice; and (2) the costs of notice shall be shared equally by the parties.

8. Plaintiffs’ Motion to Seal Exhibits Filed in Support of Plaintiffs’ Motion for Default Judgment Against De Blasi

Plaintiffs move to seal Exhibits 10, 12, 15-30, 34-40, 42-43, 46-50, 54-58 and 60 to the Declaration of Jacob Heath ISO the Motion for Default Judgment Against De Blasi.

 Plaintiffs submit that Exhibits 10, 15-30, 38-40, 46-47, 50 and 60 are email chains produced by Amin and designated Confidential pursuant to Stipulated Protective Order.
 Plaintiffs submit that Heath Exhibit 49 is email chain produced by Amin designated Confidential and containing personal identifying information of putative class members.
 Plaintiffs submit that Heath Exhibit 12 is a July 22, 2013 Declaration of Ken Nathanson containing General Account information that identifies specific payment information for various payees during 2009.
 Plaintiffs submit that Heath Exhibits 34-37 are bank account statements for Gallant and ABC that identify specific payments to various payees from December 2008 to March 2010.
 Plaintiffs submit that Heath Exhibit 57 includes copies of checks made out to De Blasi from Gallant and ABC.
 Plaintiffs submit that Heath Exhibits 54-56 and 58 contain lists of transfers to and from Gallant/ABC that Plaintiffs’ counsel compiled from Exhibits 34-37 (bank statements).
 Plaintiffs submit that Heath Exhibit 48 includes Gallant’s profit and loss statement during 2 weeks of June 2009.
 Plaintiffs submit that Heath Exhibits 42-43 contain copies of Gallant’s and ABC’s corporate tax returns.

Plaintiffs only take a position on sealing Exhibits 12 and 49 as containing personal identifying information of victims and other third parties. Plaintiffs take no position on Exhibits 10, 15-30, 34-40, 42-43, 46-48, 50, 54-58, and 60.

The motion is CONTINUED to June 27, 2014 at 9 a.m.

With regard to Heath Exhibits 12 and 49, the request to seal is not narrowly tailored. Within 10 days, Plaintiffs shall submit redacted versions of these exhibits that redact only the personal and sensitive information. With regard to Heath Exhibits 10, 15-30, 34-40, 42-43, 46-48, 50, 54-58, and 60, Amin shall have 10 days from the date of the Court’s final order on this matter to file a motion to seal these exhibits.

9. Plaintiffs’ Motion for Default Judgment Against De Blasi

The motion is CONTINUED to June 27, 2014 at 9 a.m.

10. Plaintiffs’ Motion to Compel Further Production of Documents and Request for Sanctions Against Amin

Plaintiffs move to compel Amin to (1) produce all emails and attachments responsive to requests for production not yet produced; (2) produce all winmail.dat files and native electronic files that he and his counsel previously agreed to produce; (3) if he fails to produce winmail.dat files, provide a declaration explaining why the winmail.dat files in his possession, custody and control during discovery are no longer available.

Plaintiffs argue that Amin’s production is incomplete because attachments to emails were not included in the production, despite being listed on the face of some of the emails, email chains were produced without specific emails in the chains, and no emails from other defendants closely involved with the Rewire operation like Eric De Blasi were produced. According to Plaintiffs, Amin provided a declaration dated October 6, 2013 in which he claimed to have recovered “some winmail.dat files” and extracted responsive documents and produced them during discovery, including files that contained QuickBooks materials about the companies. During a November 19, 2013 telephonic meet and confer, Brown agreed to address the deficiencies in Amin’s existing discovery responses (e.g., missing email attachments, specific emails in email chains) by December 3, 2013. Plaintiffs also pointed out that they did not receive any winmail.dat files referenced in Amin’s October 6, 2013 declaration. Brown agreed that Amin would re-produce in electronic, native format all documents responsive to Plaintiffs’ requests for production, including via hard disk copy, preserving all metadata.

According to Plaintiffs, Brown has failed to produce the winmail.dat files or any other native files, other than files in a format known as QuickBooks. These were produced in December of 2013 in the form of QuickBooks files derived from winmail.dat files. Plaintiffs further argue that certain native files were shown to exist from the footer of the PDF files produced (specifying the path to the native file that had been used to print the PDF from Brown’s “Paralegal2” computer), but these native files have not been produced, and Brown now claims to no longer have access to that computer. Plaintiffs argue that to the extent Amin and Brown are unable to produce all relevant materials in native format, they should provide declarations explaining the circumstances of their failure to preserve relevant material during the course of litigation. Plaintiffs request an evidentiary sanction that precludes Amin and Brown from introducing into evidence or presenting during a hearing or trial any documents that Amin has yet to produce, and also a monetary sanction in the amount of $9,360.00.

In opposition, Amin argues that he has complied with the Discovery Act by producing everything he had at the time of the demands. Amin submits that Plaintiffs seek documents contained on computers at Nathanson’s office that Amin cannot access. Amin explains that while he did have email accounts that he created and maintained through Gmail and another provider that no longer exists, he was unable to maintain his Gmail accounts for lack of payment of storage fees and the email attachments to those accounts are inaccessible to him. Amin submits that according to his October 6, 2013 declaration, he provided all writings in his possession and under his control that were responsive to the former discovery demands, except for things he could not provide. Amin submits that his laptop was stolen, and he contacted the hosting companies to attempt to retrieve emails from @gallantgrp.com and @rewiremyloan.com but could not obtain them. Amin submits that on January 10, 2014, a misunderstanding was addressed that winmail.dat files were never downloaded by Amin. Amin requests monetary of $2,400.00.

The motion to compel is DENIED. Amin states that the documents that Plaintiffs presume to be missing from the production (e.g., email attachments, winmail.dat files, specific emails in email chains) are not in his possession, custody or control. Although Amin stated in his October 6, 2013 declaration that he had produced winmail.dat files, Brown later clarified in a January 10, 2014 letter that this was a misstatement in that Amin did not download any winmail.dat files to a computer possessed or controlled by him, but they were viewed on the Internet and he was unable to open them. As for the print trails on some documents, Brown stated that he could not find any reference to producing a document in his office computer database labeled Paralegal-2. “We are still tracing the information and I am frustrated that someone who used to work in my office did not keep track of those events. . . . I am not going to open my database to your inspection[.]” “At this point we have produced all that exists, including native files. I have corrected a mistaken idea I had about winmail.dat files.”

Plaintiffs ask the Court to compel Amin to provide a declaration explaining why the winmail.dat files in his possession, custody and control during discovery are no longer available. However, if Brown’s statements are credited, the original statement in Amin’s October 6, 2013 declaration was a misstatement. If Plaintiffs wish to explore the purported misstatement in Amin’s October 6, 2013 declaration and the possibility that Amin and Brown failed to preserve evidence that was once in their possession, custody or control, they are free to do so, but on the current record, there is no basis to compel Amin’s further compliance when the documents are not in his possession, custody or control.

Plaintiffs’ request for evidentiary sanctions is DENIED WITHOUT PREJUDICE.

Both parties’ requests for monetary sanctions are DENIED.

11. Plaintiffs’ Motion to Seal Exhibits Filed in Support of Plaintiffs’ Motion to Compel Against Amin

Plaintiffs move to seal the following portions of the Declaration of Jacob Heath ISO Plaintiffs’ motion to compel: paragraph 29, Attachments 3-13 to Exhibit I, and Exhibit P.

 Plaintiffs submit that paragraph 29 of the Heath declaration contains the hourly rates and hours spent by Plaintiffs’ attorneys on the motion to compel, which are confidential, proprietary business information of the firm. Plaintiffs also seek to seal the hourly rate for Zahradka of the Law Foundation of Silicon Valley because his hourly rate was established with consideration of the rates charged by Orrick .
 Plaintiffs submit that Attachment to 10 Exhibit I contains personal identifying information including names and amounts paid by individuals and suggests information about their financial circumstances.

Plaintiffs take no position on Attachments 3-8 of Exhibit I, which are email chains designated Confidential by Amin under the Stipulated Protective Order. Plaintiffs also take no position on Attachments 9, 11-13 of Exhibit I, which includes general financial account information and routing numbers for Gallant. Plaintiffs also take no position on Exhibit P, which contains a username and password provided by Brown to access production files.

The motion is DENIED as to paragraph 29 of the Declaration of Heath. Plaintiffs’ contention that Orrick has an overriding interest in its hourly rates because they are confidential and proprietary is undermined by the fact that Plaintiffs have already disclosed billing rates for Orrick attorneys and for Zahradka in connection with their opposition to Amin’s motion to tax and their memorandum of costs on appeal.

The motion is also DENIED as to Heath Exhibit P. Plaintiffs do not contend that Exhibit P was designated Confidential by any party pursuant to the Stipulated Protective Order, and Plaintiffs take no position on whether the username and password provided by Brown satisfies the requirements of the Sealed Records Rules.

The motion is otherwise CONTINUED to June 27, 2014 at 9 a.m.

As for Attachment 10 to Exhibit I, within 10 days, Plaintiffs shall submit redacted versions that redact only the personal and sensitive information. As for Attachments 3-9, 11-13 of Exhibit I, Amin shall have 10 days from the date of the Court’s final order on this motion to file a motion to seal these exhibits.

12. Amin’s Motion for Permission to Seek Discovery Beyond Current Limits

Amin moves for permission to serve written discovery in excess of the limits imposed by the Court at the November 18, 2011 case management conference in which the discovery stay was lifted and each side was allowed to propound 35 written discovery requests of each type. Amin argues that the Court has broad discretion to permit additional discovery in complex cases, and that fundamental fairness requires that he be able to thoroughly learn the basis of the claims made against him. Amin argues that attempts to settle will benefit from additional discovery, and the Court will benefit from discovery in order to determine if any settlement is fair.

The motion is DENIED WITHOUT PREJUDICE. Amin’s motion fails to provide any specific details amounting to good cause for additional discovery beyond the prior limits imposed by the Court. Amin does not discuss what discovery he needs that goes beyond the current limits or how he is constrained by the current limits.

In the context of special interrogatories, the Discovery Act imposes a 35-interrogatory limit. (See Cal. Code Civ. Proc., § 2030.030, subd. (a)(1).) California Code of Civil Procedure section 2030.040, subdivision (a) provides: “Subject to the right of the responding party to seek a protective order under Section 2030.090, any party who attaches a supporting declaration as described in Section 2030.050 may propound a greater number of specially prepared interrogatories to another party if this greater number is warranted because of any of the following: [¶] (1) The complexity or the quantity of the existing and potential issues in the particular case. [¶] (2) The financial burden on a party entailed in conducting the discovery by oral deposition. [¶] (3) The expedience of using this method of discovery to provide to the responding party the opportunity to conduct an inquiry, investigation, or search of files or records to supply the information sought.” Under California Code of Civil Procedure section 2030.050, “[a]ny party who is propounding or has propounded more than 35 specially prepared interrogatories to any other party shall attach to each set of those interrogatories a declaration” that substantially conforms to statute. The “DECLARATION FOR ADDITIONAL DISCOVERY” set forth in section 2030.050 require the declarant to state that “[t]his number of questions is warranted under Section 2030.040 of the Code of Civil Procedure because _____________. (Here state each factor described in Section 2030.040 that is relied on, as well as the reasons why any factor relied on is applicable to the instant lawsuit.)” (See Cal. Code Civ. Proc., § 2030.050.)

Amin’s motion does not address the factors for additional interrogatories under section 2030.040. Brown’s October 9, 2013 declaration for additional discovery accompanying his October 2013 production of 273 special interrogatories states the number of questions is warranted because: “The lawsuit is complex”; “The number of issues presented by the First Amended Complaint contains about 200 allegations, mostly about Mr. Amin”; “Mr. Amin has indicated that the cost of defending this lawsuit is onerous and this method will enable him to examine the claims”; “The cost of using oral depositions is prohibitive to Mr. Amin”; and “This method of discovery will enable the attorneys for the Plaintiffs to carefully assemble the evidence.” However, Brown’s declaration is conclusory and does not provide sufficient reasons why the section 2030.040 factors are applicable to the instant lawsuit.