N.M. ex rel. Balderas v. Real Estate Law Ctr., No. CIV 17-0251 JB\LF

CourtUnited States District Courts. 10th Circuit. District of New Mexico
PartiesSTATE 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.
Docket NumberNo. CIV 17-0251 JB\LF
Decision Date31 December 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.

No. CIV 17-0251 JB\LF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

December 31, 2019


MEMORANDUM OPINION AND ORDER

THIS MATTER comes before the Court on the bench trial held on July 8, 2019, to July 11, 2019. The primary issues are: (i) whether the Defendants Real Estate Law Center, P.C., Erikson M. Davis, and Chad T. Pratt violated the Mortgage Assistance Relief Services ("MARS") Rule, 12 C.F.R. § 1015 "Regulation O";1 (ii) Real Estate Law, Mr. Davis, and Mr. Pratt, violated

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the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act, N.M. Stat. Ann. §§ 47-15-1 to -8 ("MFCFPA"); and (iii) what damages the Defendants owe. The Court concludes that the Defendants violated the MARS Rule and the MFCFPA. The Court awards judgment against Real Estate Law, Mr. Davis, and Mr. Pratt in the following amounts: (i) Real Estate Law: $85,941.20; (ii) Mr. Davis: $34,826.80; and (iii) Mr. Pratt: $36,955.00.

FINDINGS OF FACT

Plaintiff State of New Mexico and Mr. Parwatikar, Balanced Legal, and Pinnacle Law (collectively, the Parwatikar Defendants) have submitted proposed findings of fact. See Plaintiff's Proposed Findings of Fact and Conclusions of Law, filed August 9, 2019 (Doc. 212)("New Mexico's Proposed Findings"); Defendant Parwatikar's Proposed Findings of Fact and Conclusions of Law, filed August 9, 2019 (Doc. 213)("Parwatikar Defs.' Proposed Findings"). Defendant Chad T. Pratt also has submitted his Findings of Fact and Conclusions of Law, filed August 15, 2019 (Doc. 216)("Pratt's Proposed Findings"). The Court notes that Pratt's Proposed Findings include one paragraph asking the Court to disregard individual claimants and do not otherwise include proposed findings of fact. Defendants Real Estate Law Center, P.C. and Erikson M. Davis did not submit proposed findings of fact and conclusions of law. The Court has carefully considered New Mexico's and the Parwatikar Defendants' sets of proposed facts, and Mr. Pratt's objections, and accepts some of those facts, rejects some, and finds some facts that no party brought to its attention. The Court sets forth its findings below.

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1. Real Estate Law Operations.

1. Mr. Parwatikar is a member of the State Bar of California. See Transcript of Trial Proceedings at 635:10-12 (Anaya-Allen, Parwatikar)(taken July 10, 2019), filed July 15, 2019 (Doc. 196)("July 10 Tr.").

2. Mr. Parwatikar is not licensed to practice law in the State of New Mexico. See July 10 Tr. at 635:13-21 (Anaya-Allen, Parwatikar).

3. Mr. Pratt is a member of the State Bar of California. See Memorandum Opinion and Order at 2 n.3, filed July 2, 2019 (Doc. 183).

4. Mr. Pratt is not licensed to practice law in the State of New Mexico. See Plaintiff's First Set of Requests for Admission and Second Set of Interrogatories to Defendant Chad T-W Pratt, Request No. 18, at 6 (admitted only as to Real Estate Law, Defendant Mr. Davis, and Mr. Pratt, July 11, 2019, at trial as New Mexico's Ex. 182)("New Mexico's First Set of Requests"); Responses to Requests for Admission from New Mexico by Chad T-W Pratt, Sr., ¶ 18, at 4 (admitted July 11, 2019, at trial as New Mexico's Ex. 184)("Pratt's Responses to Requests").

5. In 2008, Mr. Pratt described himself to a reporter as a "bottom feeder" and as a "predator," because he based his legal practice on desperate clients. David Lazarus, "Things are Looking up -- at the Pawn Shop," Los Angeles Times at 4 (March 23, 2008)(admitted July 11, 2019, at Trial as New Mexico's Ex. 243).

6. Balanced Legal began operating in approximately 2008. See July 10 Tr. at 637:11-16 (Anaya-Allen, Parwatikar).

7. Balanced Legal provided immigration law services and loan modification services. See July 10 Tr. at 637:25-638:3 (Anaya-Allen, Parwatikar); Deposition of Yervand Arzakanyan at

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10:16-18 (taken September 21, 2018)(admitted July 11, 2019, at Trial as New Mexico's Ex. 188 ("Arzakanyan Depo.")).

8. Balanced Legal ceased operations around early 2011, and no longer has employees. See Deposition of Angelina Solomon at 37:8-18 (taken September 20, 2018)(admitted July 11, 2019, at Trial as New Mexico's Ex. 146)("Solomon Depo."). See also Transcript of Trial Proceedings at 803:9-11 (Kennedy, Parwatikar)(taken July 11, 2019), filed July 16, 2019 (Doc. 198)("July 11 Tr.")(stating that Balanced Legal Group did not exist when Madrid was a Real Estate Law client); July 10 Tr. at 735:5-9 (Parwatikar).

9. As Balanced Legal was a "dba" of Mr. Parwatikar, Mr. Parwatikar subsequently used it as a personal account such that money transferred from Pinnacle Law to Balanced Legal was money paid to Mr. Parwatikar. See July 10 Tr. at 637:11-16 (Anaya-Allen, Parwatikar); July 10 Tr. at 735:5-9 (Parwatikar).

10. Pinnacle Law is a professional law corporation, and Mr. Parwatikar incorporated it on July 7, 2011, and is its sole shareholder, president, chief operating officer, and chief financial officer. See Defendant Pinnacle Law Center, P.C.'s Answers, Responses, and Objections to Plaintiff's First Set of Interrogatories and Requests for Production, Answer to Interrogatory No. 8, at 6 (undated)(admitted July 10, 2019, at Trial as New Mexico's Ex. 155)("Pinnacle Law Answers"). See also Solomon Depo. at 37:8-18.

11. In 2011, Mr. Parwatikar and Pinnacle Law also helped Adlore Clarambeau incorporate Real Estate Law, and Mr. Parwatikar acted as an agent for Real Estate Law in that incorporation. See July 10 Tr. at 645:5-15 (Anaya-Allen, Parwatikar).

12. Yervand Arzakanyan worked for Balanced Legal in marketing for loan modification services, see Arzakanyan Depo. at 10:5-8; id. at 10:16-18; July 10 Tr. at 640:10-11

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(Anaya-Allen, Parwatikar), and his signature is on a check to the California Secretary of State on November 4, 2011, for $25.00 for "RELC PC Statement of Information," Check from Real Estate Law Center, P.C. to CA Secretary of State at 351-52 (admitted July 11, 2019, at Trial as New Mexico's Ex. 188); see Arzakanyan Depo. at 104:5-14.2

13. Mr. Clarambeau's email address was adlore@balancedlegalgroup.com. See Solomon Depo. at 39:4-10; Spreadsheet of Balanced Legal Employees at 177, 179 (admitted as to Real Estate Law, Mr. Davis, and Mr. Pratt July 11, 2019, at Trial as New Mexico's Ex. 146).

14. Mr. Parwatikar and Pinnacle Law knew that Mr. Clarambeau intended Real Estate Law to provide mortgage relief through lawsuits. See July 10 Tr. at 646:11-14 (Anaya-Allen, Parwatikar).

15. Pinnacle Law, with Mr. Parwatikar as its sole shareholder, occupied a position as consultant for Mr. Clarambeau and for Real Estate Law. See July 10 Tr. at 646:15-24 (Anaya-Allen, Parwatikar); id. at 659:13-15 (Anaya-Allen, Parwatikar); id. at 659:22-660:4 (Anaya-Allen, Parwatikar).

16. Pinnacle Law also had a bankruptcy and immigration practice. See Transcript of Trial Proceedings at 46:8-11 (taken July 8, 2019)(Murphy), filed July 12, 2019 (Doc. 194)("July 8 Tr."); id. at 48:2-3 (Murphy); id. at 115:22-24 (Kennedy, Paul); July 10 Tr. at 676:23-677:3 (Anaya-Allen, Parwatikar).

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17. Mr. Pratt owned Real Estate Law from September, 2011, to September, 2013. See Initial Disclosure of Chad T-W Pratt, Sr., ¶ 1, at 2 (dated August 5, 2018)(admitted only as to Real Estate Law, Mr. Davis, and Mr. Pratt July 11, 2019, at Trial as New Mexico's Ex. 178).

18. Mr. Pratt was the sole shareholder of Real Estate Law during this time. See Mr. Davis Depo. at 20:16-19.

19. Pinnacle Law continued providing Real Estate Law consulting services after Mr. Clarambeau left and Mr. Pratt became the owner. See July 10 Tr. at 662:3-5 (Anaya-Allen, Parwatikar).

20. Mr. Davis assumed ownership of Real Estate Law from Mr. Pratt on September 26, 2013. See Organizational Meeting Minutes and Minutes of Special Meeting at 5-8 (undated)(admitted July 11, 2019, at Trial as New Mexico's Ex. 241).

21. At a Special Meeting, held on September 26, 2013, at 12:00 p.m., Mr. Pratt surrendered his stock and ownership of Real Estate Law, and Mr. Davis was declared the new Chief Executive Officer, Secretary, and Chief Financial Officer, and Real Estate Law's majority and controlling shareholder. See Organizational Meeting Minutes and Minutes of Special Meeting at 7-8.

22. Mr. Davis was then Real Estate Law's sole owner and sole corporate member, had a role in overseeing Real Estate Law's operations, and fulfilled all the roles within the corporation. See Mr. Davis Depo. at 19:13-20:2.3

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23. Real Estate Law ceased operations around December, 2016, or January, 2017. See July 10 Tr. at 665:16-19.

a. The General Practices.

24. Mr. Parwatikar described to one potential employee during an interview that Real Estate Law helped people facing foreclosure. See July 8 Tr. at 85:1-9 (Paul, Anaya-Allen).

25. Real Estate Law had a foreclosure defense department, a sales department, an accounting department, and a legal department. See Arzakanyan Depo. at 14:21-15:4; id. at 15:9-13.

26. Real Estate Law clients with foreclosure sale dates had red folders, because those clients were a priority for Real Estate Law to stop the foreclosures. See Arzakanyan Depo. at 115:25-116:9.

27. Real Estate Law also had a "boiler room full of salesmen" who dictated the cases that Real Estate Law accepted. July 8 Tr...

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