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. 7 TO EXCLUDE ANY EVIDENCE OF POST-FILING CONDUCT

Hypercom Corporation submits this Response in Opposition to Omron Corporation's Motion in Limine No. 7 to Exclude Any Evidence of Post-Filing Conduct. The broad categories of evidence that Omron seeks to exclude includes, inter alia: (1) Any evidence related to the meeting on September 16, 2004, between Omron and Hypercom representatives, or any mention of the alleged demonstration of 1non-infringement performed by Hypercom during the meeting. (2) Any evidence of what investigation was conducted after the lawsuits were filed, including but not limited to, any statements from Tetsuyuki Nakano that after the lawsuits were filed he did not investigate the patent infringement claims filed by Verve against Omron. (3) Any evidence of litigation conduct or actions taken by litigants or the courts in the respective actions, including but not limited to, any orders issued in the other four actions, Omron's decision not to intervene or participate in any of the lawsuits, Verve's alleged concealment of the Assignments and any activity during the ITC Action. (Motion No. 7 at pp. 6-7.) Evidence related to that September 16, 2004 meeting is also admissible for the reasons explained in Hypercom's Response in Opposition to Omron's Motion in Limine No. 2.
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Because, contrary to Omron's contention, evidence of Omron's conduct after the filing of the Michigan, Texas, California, and International Trade Commission ("ITC") Actions is relevant to the issues to be decided in this case, Motion No. 7 should be denied in its entirety. As explained below, evidence of Omron's post-filing conduct cannot be excluded because it is relevant to all of Hypercom's claims for compensatory damages and to its claim for punitive damages (an issue that Motion No. 7 wholly ignores) and because Omron has not demonstrated any basis for excluding that evidence under Rule 403. 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 OMRON IGNORES HYPERCOM'S PUNITIVE DAMAGES CLAIM Noticeably absent from Omron's Motion No. 7 is any discussion of Hypercom's claim for punitive damages. Yet evidence of Omron's post-filing conduct is indisputably relevant to a claim for punitive damages under Arizona law. This is because whether the tortfeasor continued its bad conduct despite knowledge of the risk of harm to the victim caused by such conduct is a factor that the jury properly considers in determining whether the tortfeasor has acted with the requisite "evil mind" that will justify the imposition of punitive damages. As the Arizona Supreme Court explained in Gurule v. Illinois Mutual Life & Cas. Co., 152 Ariz. 600, 602, 734 P.2d 85, 87 (1987), "[a] jury may infer an evil mind if defendant deliberately continued his actions despite the inevitable or highly probable harm that would follow." (emphasis added). And in Thompson v. Better-Bilt Aluminum Prod. Co., Inc., 171 Ariz. 550, 832 P.2d 203 (1992), the Supreme Court reiterated that "[t]o warrant the imposition of punitive damages, `[t]he wrongdoer must be consciously aware of the wrongfulness or harmfulness of his conduct and yet continue to act in the same manner in deliberate contravention to the rights of the victim.'" (emphasis added).

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Moreover, the duration of the tortfeasor's conduct is also an element to be considered in determining the size of the punitive damages award. That is because the duration of the tortious conduct goes to the issue of the reprehensibility of the tortfeasor's conduct. As the Supreme Court held in Hawkins v. Allstate Ins. Co., 152 Ariz. 490, 497, 733 P.2d 1073, 1080 (1987), "[t]he more reprehensible the act and the more severe the resulting harm, the greater the award of punitive damages that is reasonable under the circumstances. The duration of the misconduct, the degree of defendant's awareness of the harm or risk of harm, and any concealment of it are elements to consider in judging the reprehensibility of the defendant's conduct." (emphasis added). Omron cannot make Hypercom's punitive damages claim disappear simply by failing to address it. That punitive damages claim remains in this lawsuit and will be tried to the jury (especially given that Omron never filed a timely dispositive motion on that claim, see Hypercom's Response in Opposition to Omron's Motion in Limine No. 6). Because evidence of Omron's post-filing conduct goes to prove the duration of Omron's misconduct and that Omron knowingly continued its wrongful conduct in contravention of Hypercom's rights, both of which are relevant to the jury's punitive damages analysis, evidence of that post-filing conduct is relevant and admissible. II. POST-FILING CONDUCT IS RELEVANT TO ALL OTHER CLAIMS TOO A. The Underlying Premise Of Omron's Motion No. 7 Is Erroneous

Omron asserts as a basis for its Motion No. 7 that "Hypercom has claimed that the Court should not permit the jury to hear any evidence of conduct by Omron, Verve, or Hypercom after the lawsuits were filed." (Motion No. 7 at p. 5) (emphasis in the original). That statement is not true. Hypercom has never moved (in limine or otherwise) to exclude such a sweeping category of evidence. Nor has Hypercom ever claimed that all post-filing conduct by Omron, Verve, and Hypercom is irrelevant. What Hypercom has said is that Omron cannot defend against the malicious prosecution claim by relying upon information that Omron did not know at the time the various lawsuits were filed and/or did not know before the lawsuits were terminated. In other words, Omron cannot rely on
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after-acquired knowledge to justify the filing of the lawsuits. That is because "the lack of probable cause question must be answered based upon the facts actually known to [defendant] at the time it prosecuted its patent application and infringement case . . . ." Hydranautics v. FilmTec Corp., 204 F.3d 880, 886 (9th Cir. 2000) (emphasis added). That precept is what Hypercom was explaining in the quotation from its Response in Opposition to Omron's Second Motion for Summary Judgment (doc. 141 at p. 9) that Omron recites at page 3 of Motion No. 7. Notably, what Omron does not give the Court is the two preceding sentences from Hypercom's Response: Omron attempts to escape liability for its participation in Verve's scheme by offering expert opinions after the fact to suggest that there might be some factual basis for accusing Hypercom of patent infringement. However, on a malicious prosecution claim, "probable cause is determined under an objective standard on the basis of the facts known to the defendants." Hydranautics v. FilmTec Corp., 204 F.3d 880, 886 (9th Cir. 2000). (doc. 141 at p. 9) (emphasis added). Thus, it was Omron's reliance on after-the-fact expert opinions that Hypercom said was improper. And Hypercom has now taken that same position in its "Motion in Limine Regarding Omron Corporation's Expert Witness Brad Gulko and His Report; Or in the Alterative Request for Daubert Hearing." (doc. 168.) But Hypercom has never contended that the broad category of Omron's post-filing conduct is irrelevant to Hypercom's claims,2 and as shown below such evidence is most certainly relevant to those claims. B. Malicious Prosecution

Arizona relies on the formulation of a malicious prosecution claim (also known as a wrongful civil proceeding claim) set forth in Section 674 of the Restatement (Second) of Torts. See, e.g., Frey v. Stoneman, 150 Ariz. 106, 109-11, 722 P.2d 274, 277-79 (1986); Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 417-18, 758 P.2d 1313, 131920 (1988). Section 674 makes clear that the continuation of an action can subject a person 2 Omron also quotes three sentences from some undated and unidentified "communication" from an unknown sender to an unknown recipient. See Motion No. 7 at p. 3. Without more information to put those sentences in context Hypercom cannot fully respond. It appears, however, that Hypercom was making the same point made above Omron cannot rely on after-acquired knowledge to justify the filing of the lawsuits.
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to liability: One who takes an active part in the initiation, continuation or procurement of civil proceedings against another is subject to liability to the other for wrongful civil proceedings if (a) he acts without probable cause, and primarily for a purpose other than that of securing the proper adjudication of the claim in which the proceedings are based. (emphasis added). That the continuation of an action without probable cause will subject a defendant to liability for malicious prosecution is further discussed in Comment c to Section 674: Continuation of civil proceedings. As in the case of criminal prosecutions (see § 655), one who continues a civil proceeding that has properly been begun or one who takes an active part in its continuation for an improper purpose after he has learned that there is no probable cause for the proceeding becomes liable as if he had then initiated the proceeding. (emphasis added). Plainly, evidence of Omron's post-filing conduct is relevant to the issue of whether Omron is liable under Restatement Section 674 for the wrongful continuation of the various patent infringement actions that Verve initiated against Hypercom. For example, evidence of the September 16, 2004 meeting between Hypercom and Omron at which Hypercom explained why its products did not infringe Omron's patents3 is relevant to show that Omron took an active part in the continuation of the actions for an improper purpose after Omron learned that there was no probable cause for the actions. That conduct would subject Omron to liability for malicious prosecution under Section 674. Even without regard to Omron's potential liability for the wrongful continuation of the various actions, evidence of Omron's post-filing conduct is also relevant on the issue of whether Omron (and its co-conspirator, Verve) initiated the actions against Hypercom for an improper purpose within the meaning of Restatement Section 674. After all, it is hornbook law that an actor's conduct after the event in question can be presented as circumstantial evidence of the actor's state of mind at the time of the event at issue. See, e.g., Palmaccio v. Umpierrez, 121 F.3d 781, 792 (1st Cir. 1997) (subsequent conduct may
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See Hypercom's Response in Opposition to Omron's Motion in Limine No. 2.
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be relevant to an earlier state of mind); Bark v. INS, 511 F.2d 1200, 1202 (9th Cir. 1975) (parties' conduct after marriage was relevant to extent it bore upon their subjective state of mind at the time they were married); United States v. Engh, 330 F.3d 954, 957 (7th Cir. 2003) (conduct after property transfer was "fair game as circumstantial evidence bearing on the issue of [defendant's] state of mind" at time of property transfer); United States v. James, 2006 U.S. Dist. LEXIS 60210 *24 (D. Ariz. August 21, 2006) ("`[e]vidence of subsequent, as well as prior acts is admissible to show the defendant's state of mind'"). Thus, evidence of what Omron did (or did not do, as for example not investigate the patent infringements claims that Verve had filed) after the various actions against Hypercom were commenced is relevant to show that Omron (along with Verve) commenced those actions for an improper purpose. C. Abuse Of Process

Omron misapprehends the law of abuse of process. As explained in the case Omron itself cites, "`[a]buse of process . . . is not commencing an action or causing process to issue without justification.'" Morn v. City of Phoenix, 152 Ariz. 164, 167, 730 P.2d 873, 877 (Ct. App. 1986) (emphasis added), quoting Prosser and Keaton on the Law of Torts § 121 at 897 (5th ed. 1984). It is for that reason that the continuation of a lawsuit without justification does not impose liability for abuse of process (although such continuation can impose liability for malicious prosecution, see Section II.B, above). Rather, the cause of action for abuse of process imposes liability "upon one who uses the legal process against another `primarily to accomplish a purpose for which it was not designed.'" Morn, 152 Ariz. at 166, 730 P.2d at 876, quoting § 682 of the Restatement (Second) of Torts. That improper use of legal process must necessarily take place after the lawsuit has been initiated (because the mere act of commencing a lawsuit without justification does not constitute abuse of process). "The subsequent misuse of the process, though properly obtained, constitutes the misconduct for which the liability is imposed under the rule stated in this Section [682]." Comment a to Restatement § 682 (emphasis added). It follows that actions that Omron took after the initiation of the
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lawsuit are therefore relevant to establish that Omron (together with its co-conspirator, Verve) used legal process for an improper purpose and thus is liable for the tort of abuse of process. D. Aiding And Abetting And Civil Conspiracy

Because evidence of Omron's post-filing conduct is relevant to malicious prosecution and abuse of process claims, see Sections II.B and C, above, it follows, a fortiori, that such evidence is also relevant to Hypercom's claims for aiding an abetting and civil conspiracy with respect to those two torts. III. OMRON HAS NO VALID RULE 403 BASIS FOR EXCLUSION Omron's half-hearted Rule 403 argument for excluding evidence of Omron's postfiling conduct is unavailing. Any abuse of process or malicious prosecution lawsuit must necessarily involve some sort of "trial within a trial." That is simply the nature of the beast. Nor is a jury "likely to be misled" by evidence of Omron's post-filing conduct, as Omron contends. Nor is such evidence an "attempt to impugn Omron's integrity." Omron can state no valid basis for excluding this evidence under Rule 403. IV. CONCLUSION For the foregoing reasons, the Court should deny in its entirety Omron's Motion in Limine to Exclude Any Evidence of Post-filing Conduct. 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. 7 TO EXCLUDE ANY EVIDENCE OF POST-FILING CONDUCT 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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