Free Response in Opposition to Motion - District Court of Arizona - Arizona


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Sid Leach (#019519) 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] IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Omron Corporation, Defendant. No. CV 04-0400 PHX PGR HYPERCOM CORPORATION'S RESPONSE IN OPPOSITION TO OMRON CORPORATION'S MOTION IN LIMINE NO. 5 TO PREVENT HYPERCOM FROM RELITIGATING CLAIMS AGAINST OMRON

Hypercom Corporation submits this Response in Opposition to Omron Corporation's Motion in Limine No. 5 To Prevent Hypercom From Relitigating Claims Against Omron. The Motion should be denied for multiple reasons. First and foremost, the relief sought in the Motion is essentially the dismissal of certain of Hypercom's claims and should therefore have been sought in a motion for summary judgment, not a motion in limine. Second, Omron relies chiefly on an Arizona case involving Arizona principles of collateral estoppel and, more importantly, Arizona policy considerations, whereas this issue is governed strictly by federal law. Third, the cases Omron relies upon do not present the fact pattern presented here and are therefore inapposite. Fourth, Omron's notion that collateral estoppel "caps" Hypercom's damages but allows Omron to argue to the jury that the damages should be less than determined in the prior action against Verve, L.L.C. is unsupported in federal law and contrary to basic notions of collateral estoppel. Fifth, collateral estoppel cannot apply to Judge Martone's adverse summary judgment ruling on Hypercom's claim for malicious prosecution related to the International Trade

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Commission ("ITC") action because that ruling was made "without prejudice." This Response is supported by the following Memorandum of Points and Authorities and the Court's entire file in this matter. MEMORANDUM OF POINTS AND AUTHORITIES I. OMRON'S MOTION IS NOT A PROPER MOTION IN LIMINE AND THEREFORE SHOULD BE SUMMARILY DENIED In what is styled as Omron's Motion in Limine No. 5, Omron seeks nothing less than summary judgment in its favor on (1) the amount of compensatory damages Hypercom may recover with respect to the California and Michigan lawsuits for its malicious prosecution and abuse of process claims, and the Texas lawsuit for its abuse of process claim, and (2) both liability and damages with respect to Hypercom's claims for abuse of process and malicious prosecution in the ITC Action. According to Omron, Judge Martone's August 16, 2006 summary judgment ruling in Verve L.L.C. v. Hypercom Corp., No. CV-05-0365-PHX-FJM, as well as the jury's verdict on compensatory damages in the trial of that action, should be given collateral estoppel effect in this litigation. In other words, Omron says it is entitled to summary judgment in its favor on the claims described above based on what happened in the other litigation involving its co-conspirator, Verve. This so-called "Motion in Limine" must be denied because it is nothing but a disguised motion for summary judgment and the time for filing such a motion has long since passed. This Court's November 21, 2005 Scheduling Order (doc. 76) provided that dispositive motions had to be filed no later than July 15, 2006. That deadline was subsequently extended to July 24, 2006 by this Court's Order entered July 5, 2006 (doc. 131). Omron's Motion in Limine No. 5, filed April 13, 2007, is obviously untimely when viewed as what it actually is, a dispositive motion.1 Federal case law makes clear that a party cannot use a motion in limine either as a 1 That the summary judgment ruling and the trial in Verve v. Hypercom occurred after that deadline is of no moment, for Omron could have asked the Court for leave to file an untimely summary judgment motion raising the issue of the collateral estoppel effect of the judgment in the other case. Omron chose not to do so, however, but simply (and improperly) disguised a motion for summary judgment as a motion in limine.
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substitute for a summary judgment motion or as a vehicle for resolving substantive issues, as Omron attempts to do here. For example, as the district court in Natural Resources Defense Council v. Rodgers, 2005 WL 1388671 *1 n.2 (E.D. Cal. June 9, 2005) explained, motions in limine address evidentiary, not substantive issues : Motions in limine address evidentiary questions and are inappropriate devices for resolving substantive issues. See 75 AM.JUR.2D Trials §99 (2004) (explaining that motions in limine are improper vehicles to raise motions for summary judgment or motions to dismiss because "[m]otions in limine are not to be used as a sweeping means of testing issues of law," Provident Life & Accident Ins. Co. v. Adie, 176 F.R.D. 246, 250 (D. Mich. 1997) (motion in limine cannot be used as a substitute for summary judgment)). (emphasis added). In Liquid Dynamics Corp. v. Vaughan Co., Inc., 2004 WL 2260626 (N.D. Ill. Oct. 1, 2004), the district court denied a motion in limine that sought to bar any testimony relating to the plaintiff's claim of willful patent infringement. "[Defendant's] motion is an inappropriate attempt to limit the scope of trial issues in a manner more appropriately raised in a motion for summary judgment. The motion in limine to exclude evidence of willfulness must be denied." Id. at *10. The district court in Pivot Point Int'l, Inc. v. Charlene Products, Inc., 1996 WL 284940 *4 (N.D. Ill. May 23, 1996), similarly denied a motion in limine seeking to exclude evidence of damages because "[a] motion in limine is not a substitute for a motion for summary judgment." See also Figgins v. Advance America Cash Advance Centers of Mich., Inc., ___ F. Supp. 2d ___, 2007 WL 1017273 *7 (E.D. Mich. March 27, 2007) (denying part of motion in limine on punitive damages that should have been raised as a motion for summary judgment). The principle that a motion in limine should not be used as a substitute for a summary judgment motion or as a vehicle for resolving substantive issues flows naturally from the purpose for which motions in limine are properly put. "A motion in limine is `[a] pretrial request that certain inadmissible evidence not be referred to or offered at trial.' Black's Law Dictionary, 1038 (8th Ed. 2004)." Pinal Creek Group v. Newmont Mining Corp., 2006 WL 1766494 *1 (D. Ariz. June 26, 2006). Motions in limine typically
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involve matters sought to be excluded from the jury's consideration because of the possibility of prejudice. "The primary purpose of a motion in limine is to prevent prejudice at trial." Hess v. Inland Asphalt Co., 1990 WL 51164 *1 (E.D. Wash. Feb. 20, 1990). See also Provident, supra. As the Liquid Dynamics court noted, "[e]vidence is excluded on a motion in limine only if the evidence is clearly inadmissible for any purpose. Motions in limine are disfavored; admissibility questions should be ruled on as they arise at trial." 2004 WL 2260626 at *1. See also Hess, supra (motions in limine are disfavored because "[i]n many instances, prior to trial, the court has no way of knowing (1) whether any or all of the challenged evidence will be offered at trial, (2) if so, for what purpose or purposes, (3) whether, if offered, some or all of such evidence might be admissible for one or more purposes and (4) if admissible, whether its probative value might be outweighed by prejudicial effect"). Using a motion in limine as a substitute for a motion for summary judgment is unfair because it denies the non-moving party certain procedural safeguards. For example, the response to a motion in limine is due 10 days after the motion is filed. In contrast, with a motion for summary judgment, the opposing party has 30 days to file a response opposing it. LRCiv 56.1(d). Here, Omron's supposed "Motion in Limine No. 5" actually seeks both a ruling on a substantive issue of law (whether collateral estoppel applies to various issues) and relief (a ruling in its favor on damages as to certain of Hypercom's claims and a ruling on both liability and damages as to other of Hypercom's claims) that should have been requested by means of a motion for summary judgment. Omron's Motion in Limine No. 5 is therefore an improper motion in limine and should be summarily denied. Omron should not be permitted to evade the Court's deadline for dispositive motions by a ruse. II. OMRON'S COLLATERAL ESTOPPEL ARGUMENTS ARE UNAVAILING As explained above, the Court should not entertain Omron's erroneously-styled "Motion in Limine No. 5." Even if the Court considers the Motion, however (which it should not), Omron is not entitled to the relief it seeks.
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A.

Hypercom Did Not Dismiss Verve To Get "A Second Bite"

Omron's Motion is premised on the false assumption that Hypercom dismissed Verve from this action in order to enable it to get "two bites at the apple." The Notice Hypercom filed when it dismissed Verve from this case in August of 2005, however, belies Omron's assertion. As Hypercom explained, dismissal of Verve was required because of Verve's position that this Court lacked personal jurisdiction over Verve: Verve has challenged the Court's personal jurisdiction over Verve in this case. One of the patent infringement actions that Verve filed against Hypercom, and which gave rise to the claims asserted herein, has been transferred to this District and is now pending here as Civil Action No. CV-05-365-PHXFJM. There is no question but that personal jurisdiction exists over Verve in that transferred action. Hypercom's claims against Verve can be asserted as counterclaims in that case, without resolving the jurisdictional issues raised by Verve's motion to dismiss in this case. (doc. 67 at p. 1) (emphasis added). Hypercom had a legitimate and compelling reason to dismiss Verve from this action and to pursue its counterclaims against that entity in Verve L.L.C. v. Hypercom Corp., No. CV-05-0365-PHX-FJM. Despite Omron's colorful "two bites" rhetoric, nothing about that dismissal affords any justification for applying collateral estoppel here. B. Federal Law, Not Arizona Law, Governs Collateral Estoppel Here

Omron's collateral estoppel argument is predicated almost entirely upon the Arizona Court of Appeals case of Bridgestone/Firestone North America Tire, L.L.C. v. Naranjo, 206 Ariz. 447, 79 P.3d 1206 (Ct. App. 2003), which considered the collateral estoppel effect to be given a prior Arizona state court judgment under Arizona law. In contrast, the judgment that Omron wants this Court to give collateral estoppel effect to, Verve L.L.C. v. Hypercom Corp., is a federal court judgment. Thus, it is federal law, not Arizona law, that controls the preclusive effect of the Verve judgment. As the Ninth Circuit explained in McQuillion v. Schwarzenegger, 369 F.3d 1091, 1096 (9th Cir. 2004), "[w]here a federal court has decided the earlier case, federal law controls the collateral estoppel analysis." See also First Pacific Bancorp., Inc. v. Helfer, 224 F.3d 1117, 1128

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(9th Cir. 2000) ("[w]hen considering the preclusive effect of a federal court judgment, we apply the federal law of claim preclusion"); cf. Garcia v. General Motors Corp., 195 Ariz. 510, 513, 990 P.2d 1069, 1072 (Ct. App. 1999) ("federal law, the law of the forum to first decide the issue, governs the [collateral estoppel] effect to be given the Idaho federal court ruling"). Because federal law controls the collateral estoppel effect (if any) that the Verve judgment may have here, Omron's argument, predicated on the collateral estoppel effect to be given an Arizona state court judgment under Arizona law, is simply off the mark. That Omron's argument relies on non-federal law is also true with respect to the other case it cites, Kathios v. General Motors Corp., 862 F.2d 944 (1st Cir. 1988). That case involved the preclusive effect to be given a New Hampshire state court judgment. The First Circuit was thus required to, and did, consider that issue under New Hampshire law, not federal law. Id. at 946; see also Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985) (federal full faith and credit statute requires federal courts to apply state res judicata law in determining the effect of state court judgments). Omron's argument also fails because the Arizona Court of Appeals decision preventing plaintiffs from proceeding with their second lawsuit, which was against a different defendant but arose out of the same traffic accident at issue in the first suit, was predicated not simply upon "collateral estoppel" but upon a combination of (1) collateral estoppel, (2) the doctrine of the satisfaction of judgments, (3) the fact that the fault of the defendant in the second case had already been adjudicated in the first case (as a non-party at fault), and (4) Arizona public policy considerations concerning the joining of tortfeasors. See Bridgestone/Firestone, supra, 206 Ariz. at 449-454, 79 P.3d at 1208-1213 ("[f]or all these reasons, we conclude the trial court properly entered summary judgment in favor of Bridgestone on the Naranjos' counterclaim"). None of those non-collateral estoppel considerations, however, come into play in applying the federal law of collateral estoppel, which controls in this case. More importantly, the very significant factual differences that exist between this case and Bridgestone/Firestone mean that even under
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the Arizona Court of Appeals analysis, the result would not be that advocated by Omron. See Section II.C, infra. C. Omron's Cases Depend Upon A Fact Pattern That Is Not Present Here

Both the Bridgestone/Firestone and the Kathios cases on which Omron relies in arguing that Hypercom should be collaterally estopped on the claims described above involved multiple lawsuits arising out of automobile accidents. The plaintiffs in Bridgestone/Firestone first sued the car rental company; the defendant named the tire manufacturer as a non-party at fault. The jury, in awarding plaintiffs over $9,000,000 in damages, attributed 30 percent of the fault to the manufacturer. The car rental company paid the entire damage award, plus interest, and the plaintiffs filed a satisfaction of judgment. Those are not the facts of the instant case. Here, the trial of Hypercom's counterclaims against Verve did not involve any apportionment of fault (no non-parties at fault were named in Verve v. Hypercom) and the judgment against Verve and the other counterdefendants has never been satisfied. Similarly, in Kathios, the plaintiff first brought a dram shop action against a bar. At trial, the plaintiff recovered a judgment that took into account the plaintiff's own comparative fault; that judgment was satisfied by the bar. The plaintiff later brought suit against the manufacturer of the vehicle. Once again, the differences between the case Omron relies upon and this case are significant. No comparative fault was involved in the Verve v. Hypercom trial and the judgment entered has never been satisfied. As mentioned in Section II.B, above, in holding that the plaintiffs could not proceed with their claims against the tire manufacturer, the Bridgestone/Firestone Court based its decision on a number of doctrines, of which including collateral estoppel was only one. Notably, however, the Bridgestone/Firestone Court based its collateral estoppel analysis on the same Kathios case that Omron cites here. 206 Ariz. at 452-53, 79 P.3d at 1211-12. The Kathios Court, however, articulated the issue before it in the narrowest possible terms:

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This appeal presents a narrow, highly specific question. We phrase it thusly: can a plaintiff, having obtained a jury verdict what was subject to reduction under New Hampshire's comparative negligence statute, sue a new defendant for the same injuries and damages, after the first judgment has been satisfied? 862 F.2d at 945-46 (emphasis added) (footnote omitted). Thus, the predicate of both Kathios and Bridgestone/Firestone was a prior judgment that took into account comparative fault and that had been fully satisfied. Where the first judgment was not subject to any comparative fault analysis, and where that first judgment has not been satisfied, the Kathios and Bridgestone/Firestone analysis does not apply. It follows that the Verve v. Hypercom judgment cannot have the collateral estoppel effect that Omron requests. C. Omron's Damages "Cap" Theory Is Unsupported And Illogical

Collateral estoppel should not be applied at all in this case for the reasons articulated above. Even if the Court were to consider applying collateral estoppel as to the issue of damages, however, Omron's specious damages "cap" theory must be soundly rejected. Omron contends that Hypercom should be collaterally estopped from claming that its compensatory damages in the Michigan, California, and Texas Actions were more than $223,500 the amount of compensatory damages awarded by the jury in Verve v. Hypercom but that Omron has a due process right to argue to the jurors in this case that the compensatory damages to be awarded by the jury here should be less than $223,500. This argument flies in the face of what collateral estoppel is all about. "Issue preclusion, or collateral estoppel, refers to `the preclusive effect of a judgment in foreclosing relitigation of issues that have been actually and necessarily decided in earlier litigation.'" Frankfort Digital Servs., Ltd. v. Kistler, 477 F.3d 1117, 1122 (9th Cir. 2007) (emphasis added). Foreclosing relitigation means exactly what it says relitigation of the issue is "foreclosed," i.e., the issue may not be relitigated in the second case. It follows that if this Court were to apply collateral estoppel to the compensatory damages awarded in the

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Michigan, California, and Texas Actions,2 the Court would enter an Order providing that those damages were $223,500 no more and no less. Omron's "due process" argument that it should have the right to argue that the damages are less than $223,500 here because it was not a party in the prior action and therefore could not contest the amount of damages awarded is simply answered. Omron is the one who is asking the Court to apply collateral estoppel. If Omron elects to argue for collateral estoppel on the issue of compensatory damages, then Omron necessarily waives any right it may otherwise have to challenge the amount of those damages. Conversely, if Omron wants the right to challenge the amount of Hypercom's damages, then Omron cannot request that the Court apply the doctrine of collateral estoppel to the issue of compensatory damages. Omron cannot have it both ways. Omron cites no case in which its novel damages "cap" theory was actually applied. That is, Omron cannot point to any instance in which collateral estoppel was applied to "cap" the amount of the plaintiff's damages but yet permitted the defendant to argue to the jury in the second case that the damages should be less than that "cap." All that Omron cites is the out-of-context use of the word "cap" in Kathios, which was then quoted in the Bridgestone/Firestone opinion. But remember, in neither of those cases did a second trial ever take place because in each case the appellate court held that the plaintiff could not pursue the second action. That a defendant must elect whether to seek collateral estoppel treatment on the issue of damages or to forego collateral estoppel and instead be free to contest the plaintiff's damages claim is made clear in a case cited relied upon by the Bridgestone/Firestone Court. In Selchert v. State, 420 N.W.2d 816, 818 (Iowa 1988), another case involving two suits arising from one automobile accident, the Iowa Court explained that "[Plaintiff] readily concedes that at least two major issues in the former 2 Issue preclusion bars relitigation of issues adjudicated in an earlier proceeding if three requirements are met: (1) the issue necessarily decided at the previous proceeding is identical to the one which is sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom issue preclusion is asserted was a party or in privity with a party at the first proceeding. Frankfort Digital Servs., supra, 477 F.3d at 1122.
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trial could be barred from further litigation in the present action, at defendant's election: the extent of [Plaintiff's] injuries and her relative fault, as compared to [prior defendant's], in causing them." (emphasis added).3 Because in Selchert the plaintiff's judgment from the first action was unsatisfied, she was allowed to proceed with her second action against a new defendant. And although collateral estoppel could be applicable, the defendant was put to the election of asking that collateral estoppel apply to the issue of plaintiff's injuries, i.e., damages, or of contesting those damages at the second trial. Similarly, if the Court were to determine that collateral estoppel is potentially applicable here, Omron must be put to the same type of election required of the defendant in Selchert. D. Collateral Estoppel Cannot Apply To The "Without Prejudice" Ruling

Finally, Omron asks the Court, based on Judge Martone's summary judgment ruling, to essentially grant summary judgment for Omron on both liability and damages with respect to Hypercom's claims for abuse of process and malicious prosecution in the ITC Action. But Judge Martone's Order stated that he was "GRANTING Verve's motion to dismiss count II [malicious prosecution] as to the Texas and ITC actions without prejudice." 8/16/06 Order in Verve v. Hypercom at p. 13 (doc. 167-2 at p. 14 of 14 in this case) (emphasis added). Because Judge Martone dismissed those claims "without prejudice" to Hypercom's right to reassert the claims in another action,4 the doctrine of collateral estoppel is inapplicable. Therefore, Hypercom cannot be precluded from pursuing its malicious prosecution claims as to the ITC Action.5 As the Ninth Circuit counseled in Frankfort Digital Servs., in order for collateral estoppel to apply, one requirement is that "the first proceeding ended with a final The Selchert case was cited by Bridgestone/Firestone for the proposition that "although plaintiff's unsatisfied judgment in first case did not bar subsequent, new action against different defendant, collateral estoppel barred relitigation of issue on `extent of [plaintiff's] injuries.'" 206 Ariz. at 452, 79 P.3d at 1211. 4 See also 8/16/06 Order in Verve v. Hypercom at p. 8 (doc. 167-2 at p. 9 of 14 in this case). 5 Regardless of the doctrine of collateral estoppel, Hypercom does not contend in this suit that its abuse of process claim could lie as to the ITC Action.
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judgment on the merits." 477 F.3d at 1122 (emphasis added). A judgment dismissing a claim "without prejudice" is most certainly not a judgment "on the merits." After all, "an `adjudication upon the merits' is the opposite of a `dismissal without prejudice.'" Lambert v. Blodgett, 393 F.3d 943, 966 (9th Cir. 2004), quoting Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 505 (2001); see also Rule 41(a)(1), Fed. R. Civ. P. Thus, the Court in Scholastic Entertainment, Inc. v. Fox Entertainment Group, Inc., 336 F.3d 982, 989 n.4 (9th Cir. 2003), noted that "collateral estoppel does not apply to claims which are not litigated or decided on the merits." (emphasis added). See also Samadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1159 (9th Cir. 2002); Restatement (Second) of Judgments § 27, Comment n ("[i]f, however, a judgment of dismissal is wholly without prejudice, then it has no conclusive effect between the parties in a subsequent action on the same or a different claim"). The only authority Omron cites for its illogical notion that the dismissal of a claim "without prejudice" can have a preclusive effect is Offshore Sportswear, Inc. v. California Shirt Printer, Inc., 114 F.3d 848 (9th Cir. 1997), a case involving issue preclusion in the very specific context of a contractual forum selection clause. "We hold that an order dismissing an action to enforce a forum selection clause is preclusive on the issue of the applicability, and the enforceability, of the clause when the issues and the parties remain the same. Accordingly, Offshore may not relitigate these issues even though the dismissal of the prior action was `without prejudice.'" Id. at 849. Patently, this case does not involve either the applicability or the enforceability of a forum selection clause. It follows that Judge Martone's "without prejudice" dismissal of Hypercom's malicious prosecution claim concerning the ITC Action cannot have collateral estoppel effect in this lawsuit. III. CONCLUSION For the foregoing reasons, the Court should deny in its entirety Omron's Motion in Limine to Prevent Hypercom From Relitigating Claims Against Omron. Alternatively, if the Court were to give preclusive effect to the amount of compensatory damages awarded as to the Michigan, California, and Texas Actions in Verve v. Hypercom, the Court should
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prohibit Omron from arguing to the jury that Hypercom's compensatory damages are any less than $223,500. RESPECTFULLY SUBMITTED this 30th day of April, 2007. SNELL & WILMER L.L.P.

By s/ Monica A. Limón-Wynn Sid Leach Monica A. Limón-Wynn SNELL & WILMER L.L.P. One Arizona Center Phoenix, AZ 85004-2202 Attorneys for Plaintiff Hypercom Corporation

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CERTIFICATE OF SERVICE I hereby certify that on April 30, 2007, I electronically transmitted HYPERCOM CORPORATION'S RESPONSE TO OMRON CORPORATION'S MOTION IN LIMINE NO. 5 TO PREVENT HYPERCOM FROM RELITIGATING CLAIMS AGAINST OMRON to the Clerk's Office using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following 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] Attorneys for Defendant Omron Corporation A. Colin Wexler Matthew A.C. Zapf GOLDBERG KOHN BELL BLACK ROSENBLOOM & MORITZ, LTD. 55 E. Monroe Street, Ste. 3300 Chicago, IL 60603 Ph. 312-201-4000 Fax: 312-332-2196 [email protected] [email protected] Attorneys for Defendant Omron Corporation s/ Monica A. Limón-Wynn
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H. Michael Clyde Todd R. Kerr PERKINS COIE BROWN & BAIN P.A. 2901 N. Central Ave., Ste. 2000 Phoenix, AZ 85012-2788 Ph.: 602-351-8000 Fax: 602-648-7000 [email protected] [email protected] Attorneys for Defendant Omron Corporation

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