Free Reply to Response to Motion - District Court of Arizona - Arizona

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Sid Leach (#019519) Andrew F. Halaby (#017251) Monica A. Limón-Wynn (#019174) SNELL & WILMER L.L.P. One Arizona Center 400 E. Van Buren Phoenix, AZ 85004-2202 Telephone: (602) 382-6372 Attorneys for Plaintiff Hypercom Corporation [email protected] [email protected] [email protected] IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Verve, L.L.C., and Omron Corporation, Defendants. No. CV 04-0400 PHX PGR HYPERCOM CORPORATION'S REPLY BRIEF ON MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

Defendant Omron Corporation's ("Omron") opposition to Plaintiff Hypercom Corporation's ("Hypercom") motion for leave to file a second amended complaint asserts the motion should be denied on grounds that it is futile because Omron argues it would allegedly be entitled to summary judgment. Omron repeatedly asserts that Hypercom has not identified evidence to support the asserted claims. However, there is no requirement in Rule 15(a), Fed.R.Civ.P., that a plaintiff must offer evidence to support a claim before leave to amend can be granted. Normally, justice would require that a party have an opportunity for discovery before a court summarily adjudicates a claim in which the evidence is in the hands of the defendant. And under Rule 15(a), leave to amend "shall be freely given when justice so requires." The arguments advanced by Omron are inappropriate because the pending motion was filed before discovery on the merits commenced. The evidence to support Hypercom's claims is in the hands of Omron. The jurisdictional discovery permitted in

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this case did not even address the claims of aiding and abetting or Omron's activities as an instigator of the baseless litigation filed against Hypercom. The Deposition of Douglas Reich Does Not Demonstrate A Lack Of Evidence Omron repeatedly cites to the deposition of Douglas Reich taken on March 23, 2005, as demonstrating that Hypercom lacks any evidence to support claims that were not

6 in the case when the deposition was taken, and which were not included within the scope 7 of the deposition notice. During the deposition of Mr. Reich, Hypercom repeatedly told 8 Omron that no Hypercom Rule 30(b)(6) witness could provide Omron with a complete 9 response concerning all of the evidence in Hypercom's possession due to the restrictive 10 nature of the protective order in the ITC proceeding. The ITC protective order prevented 11 any Hypercom employee from having access to evidence designated as "confidential 12 business information" in the ITC proceeding, and Verve designated most of the evidence 13 it produced as "confidential business information." During the deposition of Douglas 14 Reich (and at other times), Hypercom told Omron to serve interrogatories to obtain 15 discovery of such information under these unusual circumstances. 16 MR. LEACH: Also just to clarify, we are not sitting here saying that 17 we are not going to give you information because it's confidential. 18 What we are doing is acknowledging the fact that because of the way 19 the protective order is structured in the ITC, we can't even educate 20 [Mr. Reich] on some of that information because it was designated as 21 confidential by Verve under that protective order. And we're 22 prohibited by that protective order from telling Doug Reich or 23 anybody at Hypercom confidential business information. 24 So that's what our problem is. It's not that we are sitting here saying 25 that he knows something, but because it's confidential, he is not 26 going to tell it to you. He would love to tell you if he could, but we 27 just couldn't - - we were constrained in our ability to educate a 28
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30(b)(6) witness because of the constraints placed on that which is why an interrogatory answer would be - - would facilitate this kind of discovery better. MR. HENNING: Okay. Let me ask the question to the witness then. BY MR. HENNING: I am not asking you to adopt your attorney's statements, but do you agree with what he said? Yes. I mean, some of the information you can't share with me because of the protection, the confidentiality agreement in the ITC proceeding? Yes. MR. LEACH: Because we couldn't share it with him. BY MR. HENNING: Okay. But this is probably something then that we need to discuss off the record. I don't think there is any need to have this on the record. MR. LEACH: Yeah, but we are not saying that we wouldn't give you discovery here if he knew it, but we can't even tell it to him. So he can't testify about it. MR. HENNING: Okay. MR. LEACH: But we would be willing to work with you to facilitate discovery of that kind of information, but I think it probably has to come from interrogatory answers or something that the lawyers can participate in getting to you. Reich Deposition, at 54-55, attached as Exhibit 24 to Hypercom's Statement of Facts. See also Reich Deposition, at 22-23 & 51. Omron never sought such discovery by serving interrogatories. Under these circumstances, it is unfair for Omron to represent to the Court that the Reich deposition supports Omron's arguments that Hypercom has no evidence.

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Omron Cannot Argue That Hypercom Has No Evidence While At The Same Time Preventing Hypercom From Filing Evidence With The Court Omron has effectively preventing Hypercom from filing any further evidence to support Hypercom's allegations, because Omron has made bad faith allegations that Hypercom has and will violate the protective order entered in the ITC proceedings if Hypercom files any such evidence containing "confidential business information" with the Court in this case. Exhibit A, Declaration of Sid Leach ¶¶ 2 & 6. Verve has joined in the false accusations. Exhibit A, Declaration of Sid Leach ¶8; Exhibit 6. This Court should not entertain Omron's arguments concerning the alleged absence of evidence while Omron is effectively preventing Hypercom from filing such evidence by making accusations to the International Trade Commission that Hypercom will violate the ITC protective order if Hypercom files it with this Court. Omron's attorneys have accused Hypercom of violating the ITC protective order if Hypercom files materials with this Court that were designated as "confidential business information" in the ITC proceeding. Exhibit A, Declaration of Sid Leach ¶2. Until Hypercom can obtain discovery of such "confidential business information" by other means, Omron has effectively prevented Hypercom from filing such evidence with this Court. It is therefore unjust for Omron to move for summary judgment, or claim that Hypercom cannot point to evidence to support its claims in the second amended complaint, while at the same time complaining to the International Trade Commission that if Hypercom files any such evidence with the Court it is a violation of the ITC protective order. The allegations that Hypercom has violated the ITC protective order are false. On December 17, 2004, Hypercom requested Verve's consent to file documents in this federal court that had been produced by Verve in the ITC proceeding and designated as containing confidential business information. Exhibit A, Declaration of Sid Leach ¶3; Exhibit 3. This offer was made to relieve Verve of the burden of producing the same

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documents again in this litigation. In a letter dated March 2, 2005, Verve gave consent to file documents with this Court that had been designated as containing confidential business information in the ITC proceedings. Exhibit A, Declaration of Sid Leach ¶4; Exhibit 4. Thereafter, when Hypercom filed documents with this Court that were designated as containing confidential business information, Hypercom filed the documents under seal. Exhibit A, Declaration of Sid Leach ¶4. Some documents were filed in Civil Action No. CV-05-0365-PHX-FJM, and some documents were filed in this case. Subsequently, this federal court entered certain orders unsealing documents that Hypercom had filed under seal in this civil action and in Civil Action No. CV-05-0365PHX-FJM. For example, this Court entered an order on August 18, 2005 unsealing documents. (Doc. #64). In Civil Action No. CV-05-0365-PHX-FJM, other orders were entered unsealing documents. (See, e.g., Doc. #158). Nevertheless, when Hypercom subsequently filed those same documents (that this Court had unsealed) as exhibits in opposition to Omron's motion for summary judgment, Omron brought charges against Hypercom's counsel in the International Trade Commission. Exhibit A, Declaration of Sid Leach ¶¶ 6-7; Exhibit 5. On Friday, January 20, in a fax sent to Hypercom's counsel at 6:36 p.m. on Friday evening, Verve made similar false of charges of protective order violations based upon the same documents. Exhibit A, Declaration of Sid Leach ¶ 8; Exhibit 6. Neither Verve nor Omron informed the ITC that Verve had given its consent for Hypercom to file the documents with this Court. Nor did either Verve or Omron inform the ITC that this Court had entered orders unsealing the documents. This kind of bad faith is typical of Verve. The sanctions order entered by the ITC imposing a $1,000,000 sanction against Verve and its attorneys was based, in part, on false representations that Verve made to the ITC. In this instance, Omron has joined in Verve's misrepresentations to the ITC. If there was ever any doubt concerning the concerted action between Verve and Omron in making baseless allegations against Hypercom, this episode should put such doubts to rest.
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The material that Verve designated as "confidential business information" in many instances borders on frivolous. For example, When Omron's attorney accused Hypercom of violating the ITC protective order, the documents that were specifically singled out and identified by Omron's attorney as allegedly containing confidential business information included a page listing the attorneys in the Simon, Galasso & Frantz law firm. Exhibit 65, at 39 (Doc. #86 ). But this is the kind of information that is published in legal directories like Martindale Hubble. Verve designated virtually every document it produced in the ITC proceeding as containing confidential business information. Verve designated its agreements with Omron as containing information so sensitive that Verve redacted the documents, and refused to produce unredacted versions of the documents even though there was a protective order for confidential information. The ITC administrative law judge had to order Verve to produce unredacted versions of the documents. These same allegedly highly sensitive confidential documents were produced by Omron in this case without any designation of confidentiality whatsoever. Verve and Omron have used the ITC protective order to impede Hypercom's prosecution of its claims against Verve and Omron. The ITC proceeding was terminated on June 8, 2005, in favor of Hypercom and the other respondents. There is no longer any pending investigation, and thus no available procedure for Hypercom to make a motion in the ITC to unseal the documents that Verve designated as containing confidential business information. Therefore, Hypercom will now be forced to duplicate the ITC discovery, and to require Verve to produce the same documents again so that the documents can be used in this case without subjecting Hypercom and its counsel to false allegations of violations of the ITC protective order. Verve's claims of confidential information produced during discovery should be governed only by appropriate protective orders entered by this Court. Under these circumstances, significant discovery must be repeated in this case before Hypercom will be in a position to effectively resist Omron's efforts to obtain summary dismissal of the claims in this case. Omron is not in a position to complain, however,
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because these circumstances are of Omron's own making. For purposes of Hypercom's motion for leave to file a second amended complaint, Omron should not be allowed to argue that Hypercom's amendment is futile on grounds that Hypercom allegedly cannot submit evidence to substantiate its allegations. Omron and Verve are effectively preventing Hypercom from filing evidence with this Court by making false charges before the ITC concerning the protective order in the ITC proceeding. Conclusion Omron's efforts to obtain summary dismissal of this case without allowing discovery on the merits should not be allowed. Omron should not be permitted to team up with Verve and use false allegations of ITC protective order violations to prevent Hypercom from filing evidence with this Court, and at the same time argue that Hypercom has no such evidence. Hypercom's motion for leave to file a second amended complaint should be granted. DATED this 23rd day of January, 2006.

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SNELL & WILMER L.L.P.

By s/Sid Leach Sid Leach Andrew F. Halaby Monica A. Limón-Wynn One Arizona Center 400 E. Van Buren Street Phoenix, AZ 85004-2202 Attorneys for Plaintiff Hypercom Corporation

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CERTIFICATE OF SERVICE I hereby certify that on January 23, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: David P. Irmscher John K. Henning, IV BAKER & DANIELS 300 N. Meridian Street, Suite 2700 Indianapolis, IN 46204 Phone: 317-237-1317 Fax: 317-237-1000 [email protected] [email protected] Paul Moore Ray K. Harris FENNEMORE CRAIG, P.C. 3003 N. Central Avenue, Suite 2600 Phoenix, AZ 85012-2913 Phone: 602-916-5414 Fax: 602-916-5614 [email protected] [email protected] Attorneys for Defendant Omron Corporation s/ Sid Leach

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Index of Exhibits Exhibit A - Declaration of Sid Leach Exhibits 1 to 6 Exhibit 1 - January 4, 2006 email from Hypercom's attorney to Omron's attorney Exhibit 2 - January 4, 2006 subsequent email from Hypercom's attorney to Omron's attorney Exhibit 3 - December 17, 2004 letter from Hypercom's attorney to Verve's attorney Exhibit 4 - March 2, 2005 letter from Verve's attorney to Hypercom's attorney Exhibit 5 - January 9, 2006 letter from Hypercom's attorney to the ITC staff Exhibit 6 - January 20, 2006 letter from Verve's attorney to Hypercom's attorney

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