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 Street Phoenix, AZ 85004-2202 Telephone: (602) 382-6372 [email protected] [email protected] Attorneys for Plaintiff Hypercom Corporation 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 FOR LEAVE TO DESIGNATE POTENTIAL NONPARTIES AT FAULT

The Court should deny Omron Corporation's ("Omron's") Motion for Leave to Designate Potential Non-Parties at Fault ("Motion") for two separate and distinct reasons. First, absent newly discovered evidence, the time limitations governing the naming of non-parties at fault should not be disturbed. Ariz.R.Civ.P 26(b)(5); see also Soto v. Brinkerhoff, 903 P.2d 641 (Ariz. Ct. App. 1995)1. Rule 26(b)(5) gave Omron 150 days after it answered Hypercom Corporation's ("Hypercom's") Second Amended Complaint to name Verve, LLC ("Verve") as a non-party at fault. Omron did not seek leave to name Verve as a non-party at fault until seven months after it answered Hypercom's Second Amended Complaint (three months after the Rule 26(b)(5) deadline). Omron has not discovered any new evidence relating to Verve's liability, therefore, it cannot now name Verve as a non-party at fault. Arizona law, specifically Arizona Rules of Civil Procedure 26(b)(5), governs whether Omron's disclosure of Verve as a non-party at fault is proper. Wester v.Crown Controls Corp., 974 F. Supp. 1284 (D. Ariz. 1996) ("Erie considerations strongly support the application of Ariz.R.Civ.P. 26(b)(5) in this diversity case.")
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Second, even if Omron's effort to notice a non-party at fault could be considered as timely, Omron's notice of non-party at fault serves no purpose. Hypercom's claims against Omron concern Omron's actions "in concert" with Verve. While Arizona law generally has done away with joint and several liability, those who "act in concert" with another person or entity, however, are jointly and severally liable with that person or entity. A.R.S. § 12-2506(D). For this reason, if Omron is found liable, it is not entitled to have its fault compared to Verve's. See id; see also Wiggs v. City of Phoenix, 10 P.3d 625 (Ariz. 2000). In these circumstances, "it does not make legal or tactical sense to name [Verve] as a non-party at fault." See Wiggs, 10 P.3d at 629. For these two separate and distinct reasons, the Court should deny Omron's request for leave to designate Verve as a non-party at fault. I. DISCLOSURE OF VERVE AS A NON-PARTY IS UNTIMELY; NO NEWLY DISCOVERED EVIDENCE JUSTIFIES THE UNTIMELY NAMING OF VERVE AS A NON-PARTY AT FAULT. It is telling that Omron fails to quote Arizona's rule regarding the disclosure of non-parties at fault despite the fact that Omron requests leave to violate the Rule. Arizona Rule of Civil Procedure 26(b)(5) governs the disclosure of non-parties at fault. Rule 26(b)(5) states: Any party who alleges, pursuant to a A.R.S. § 12-2506 (as amended), that a person or entity not a party to the action was wholly or partially at fault in causing any personal injury, property damage, or wrongful death for which damages are sought in the action shall provide the identity, location, and the facts supporting the claimed liability of such nonparty at the time of compliance with the requirements of Rule 38.1(b)(2) of these Rules, or within one hundred fifty (150) days after the filing of that party's answer, which-ever is earlier. The trier of fact shall not be permitted to allocate or apportion any percentage of fault to any nonparty whose identity is not disclosed in accordance with the requirements of this subpart 5 expect upon written agreement of the parties or upon motion establishing newly discovered evidence of such nonparty's liability which could not have been discovered within the time periods for compliance with the requirements of this subpart 5.

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According to the Rule, unless newly discovered evidence supports the naming of a non-party at fault more than 150 days after the filing of a party's answer, a jury cannot allocate fault to the non-party. Rule 26(b)(5); see also Soto v. Brinkerhoff, 903 P.2d 641 (Ariz. Ct. App. 1995) (applying Rule 26(b)(5)). Here, Hypercom moved for leave to file its Second Amended Complaint on December 15, 2005 and lodged the proposed form of amended pleading pursuant to LRCiv 15.1. Hypercom dismissed Verve from this action on August 29, 2005. Hypercom's proposed pleading established that Verve would not be a named party in Hypercom's Second Amended Complaint. On June 7, 2006, the Court granted leave to Hypercom to file its proposed Second Amended Complaint. Under Rule LRCiv 15.1(c), the Second Amended Complaint was filed on June 7, 2006. Omron filed its answer to Hypercom's Second Amended Complaint on July 5, 2006. Omron has known since August 2005 that Verve no longer was a party to this lawsuit, and has known since December 15, 2005 that Verve would not be a party in the future based upon the proposed Second Amended Complaint. Nonetheless, under the governing Rule, Omron had 150 days from July 7, 2006 when Omron filed its answer to the Second Amended Complaint to serve notice of non-party at fault (or at the most until December 11, 2006). Omron failed to do so. Omron offers no justification for missing this deadline. Instead, it claims that because Verve was previously a party to this action, the 150-day deadline does not apply. Omron's contention neither supported by the facts of this case nor Arizona law. A. Hypercom Did Not Name Verve As a Party in the Second Amended Complaint; Thus, Verve is not Party to this Action.

Omron erroneously contends that since Verve was named as a defendant in Hypercom's First Amended Complaint, the 150-day deadline for disclosure of Verve as a 24 non-party at fault does not apply. The facts belie Omron's contention. Although Verve 25 was a named defendant in Hypercom's First Amended Complaint, Verve was not named 26 in Hypercom's Second Amended Complaint. The Second Amended Complaint is the 27 operative complaint in this action; therefore, Verve is not a party to this action. Thus, 28
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even if an exception to the 150-day deadline under Rule 26(b)(5) exists to disclose previously-named parties as non-parties at fault (and no exception does), Omron's present motion would not fall under the purported exception. B. There is no Blanket Exception to Rule 26(b)(5) Allowing for Late Disclosure of Non-Parties Who Were Previously Named as Defendants.

Even if Verve could somehow be characterized as a party to the Second Amended Complaint, Verve's purported status as a prior party does not allow Omron to name Verve 7 as a non-party at fault after the Rule 26(b)(5) deadline. Omron cites Lyphomed, Inc. v. 8 9 was a co-defendant, and for this reason alone, Arizona courts would hold that Omron is 10 not required to disclose Verve as a party whose fault should be considered at trial." 11 (Motion at 3:18-22.) Lyphomed does not support that contention. 12 In Lyphomed, one of the defendants ­ a hospital ­ settled the plaintiff's claims 13 against it on April 22, 1991. 837 P.2d at 1161. Under the settlement, the hospital was 14 dismissed from the case with prejudice. Id. "In early May," less than a month after the 15 hospital had settled with the plaintiff, the remaining defendant Lyphomed served notice 16 that the hospital was a non-party at fault. Id. 17 Because the disclosure of the hospital as a non-party at fault occurred more than 18 150 days after Lyphomed had answered the Complaint, the trial court refused to allow 19 20 21 22 23 24 25 26 27 28 Omron also relies on Wilson v. Maricopa County, No. CV-04-2873 PHX-DGC, 2007 WL 686726 (D. Ariz. March 2, 2007) to support its motion for leave to name Verve as a non-party at fault. Wilson, however, is not germane under the circumstances of this case and thus offers no support for Omron's position. In Wilson, the defendant served notice of a non-party at fault when it answered the complaint. Id. at *12. The defendant, however, did not know the names and addresses of the non-parties at fault. Id. Once the defendant learned the identities of the non-parties, it promptly supplemented its non-party at fault disclosure. Id. Despite that plaintiff knew defendant had planned to allocate fault to a non-party from the beginning of the case, the plaintiff moved to bar any allocation of fault. Id. Plaintiff's motion was denied, because "[d]efendant timely identified [the nonparties] as non-parties at fault." Id. In contrast, Omron did not timely identify a nonparty at fault. Omron did not serve notice of its intent to allocate fault to another party until more than seven months after it answered the Second Amended Complaint. Allowing Omron to name Verve as a non-party here does not serve the policy of Rule 26(b)(5) to allow "each party to know exactly what every other party in a case is claiming with respect to who caused the injury." Lyphomed, Inc., 837 P.2d at 1163.
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Superior Court, 837 P.2d 1158 (Ariz. Ct. App. 1992) 2 to support its claim that "Verve

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Lyphomed to compare its fault with the hospital's fault.3

Id. at 1162.

Lyphomed

appealed. Id. On appeal, the Arizona Court of Appeals reversed finding that Rule 26(b)(5) only requires disclosure of "non-parties" at fault, and Lyphomed had disclosed the hospital as a "non-party" at fault almost immediately after the hospital became a "nonparty." Id. at 1162-63. The naming of the non-party at fault in Lyphomed was, therefore, in accord with the text of the Rule. Id. Rule 26(b)(5) allows the naming of non-party after the deadline if "newly discovered evidence" supports the naming of the non-party. Rule 26(b)(5). In Lyphomed, the newly-discovered evidence was the fact that the hospital settled its part of the case and rendered itself a non-party. See id. at 1162. Although not explicitly stated in the opinion, it is clear this newly-discovered evidence allowed Lyphomed to name the hospital as a non-party more than 150 days after filing its answer. See id. at 1163. Thus, Lyphomed merely holds that if a prior party subsequently becomes a nonparty but is immediately named as a non-party at fault, the prior party's fault may be compared. Contrary to Omron's contention, however, under Lyphomed, the timeframe for naming a non-party at fault is not without limit. Rule 26(b)(5) requires that all non-parties at fault be named within 150 days of filing a party's answer. The policy reason for this time limit is that "it is useful . . . for each party to know exactly what every other party in a case is claiming with respect to who caused the injury." Lyphomed, Inc., 837 P.2d at 1163; see also Soto, 903 P.2d at 645 (same). In accord with this policy, and consistent with Lyphomed, if a defendant becomes aware of a non-party at fault after filing its answer, the defendant should have, at most, 150 days from the date it becomes aware of The Lyphomed opinion is complicated by the fact that prior to the hospital's settlement Lyphomed had served a response to an interrogatory that failed to identify the hospital as an entity whose fault should be compared with Lyphomed's. Id. at 1164. When Lyphomed named the hospital as a non-party at fault, it also sought leave to amend its answer to that interrogatory. Id. at 1165. The hospital and the plaintiff claimed they entered into a settlement based in part on Lyphomed's unamended answer to the interrogatory. Id. Whether Lyphomed should have been allowed to amend its interrogatory answer was the issue on appeal. Id. If Lyphomed was not allowed to amend its interrogatory answer, Lphyomed would not have been allowed to assert that the hospital was a non-party at fault. Id. A substantial portion of the opinion is dedicated to this issue.
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the non-party at fault to file a notice of non-party at fault. In this case, Omron failed to seek leave to serve notice of a non-party at fault until more than seven months after it answered Hypercom's Second Amended Complaint, even though (and based upon the allegations) it had knowledge of Verve's conduct all along.4 In these circumstance, absent newly- discovered evidence attributing fault to Verve, Rule 26(b)(5) does not allow Omron to now name Verve as a non-party at fault. Omron offers no newly-discovered evidence to justify or warrant such a substantial deviation from the Rule or the policy it supports. For this reason alone, Omron's motion should be denied. II. THE COURT SHOULD ALSO DENY OMRON'S MOTION BECAUSE AS A CO-CONSPIRATOR OMRON MAY NOT COMPARE VERVE'S FAULT TO ITS OWN Even had Omron timely-disclosed Verve as a non-party at fault, the naming of

12 Verve as a non-party at fault would have no effect on Omron's liability; Omron's fault 13 cannot be compared to Verve's. See A.R.S. § 12-2506(D). Therefore, the Court should 14 deny Omron leave to name Verve as a non-party at fault. See Wiggs v. City of Phoenix, 15 10 P.3d 625 (Ariz. 2000). 16 Omron correctly asserts that Arizona generally has done away with joint and 17 several liability. (Motion at 3:1-8.) Omron fails to realize, however, that Arizona retains 18 joint and several liability if "both the party and the other person were acting in concert." 19 20 defines persons acting in concert as: 21 22 23
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A.R.S. § 12-2506(D).5 The RESTATEMENT (SECOND) OF TORTS § 876 Acting in Concert

(a) [when a person or entity] does a tortious act in concert with the other or pursuant to a common design with him, or Verve was rendered a non-party to this suit on August 29, 2005. (Dkt. # 67.)

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Although there are many reasons Arizona does not compare the fault of those who act in concert, perhaps the strongest reason is that "[o]ne person's fault does not necessarily detract from another's fault. Not only may the wrongfulness of one person's act not decrease the wrongfulness of another's, but it actually may increase it. This is the basic reason that conspiracies, for example, are often considered worse than individual misconduct." Ellen M. Bublick, The End Game of Tort Reform: Comparative Apportionment and Intentional Torts, 78 NOTRE DAME L. REV. 355 at 401-02 (Jan. 2003).
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(b) [when a person or entity] knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or (c) [when a person or entity] gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person. Hypercom's claims against Omron allege civil conspiracy, malicious prosecution, and aiding and abetting claims. (Hypercom's Second Amended Complaint.) Each of these claims allege that Omron acted in concert with Verve: Hypercom's civil conspiracy claim alleges that "Verve and Omron agreed to accomplish the unlawful purpose of commencing patent infringement actions against Hypercom without probable cause . . ." (id. at ¶ 82); Hypercom's malicious prosecution claim alleges, "Verve commenced civil actions against Hypercom alleging patent infringement without probable cause . . . . Omron was an instigator of the malicious prosecution lawsuits that were filed by Verve against Hypercom." (id. at 89-90); and Hypercom's aiding and abetting claim alleges, "Omron acted willfully and wantonly in encouraging and substantially assisting Verve to bring unfounded patent infringement suits against Hypercom without having a good faith basis . . . ." (Id. at 93.) Therefore, each of Hypercom's claims concern Omron's actions in concert with Verve. For this reason, Omron and Verve are jointly and severally liable. Thus, if Omron is found liable, it is liable for 100% of Hypercom's harm. Omron is not entitled to compare its fault with Verve's. In factually dissimilar but legally analogous case, the Arizona Supreme Court refused to allow a defendant to name a non-party at fault. In Wiggs v. City of Phoenix, 10 P.3d 625 (Ariz. 2000), the mother of a child that was struck at an intersection by a vehicle brought suit against the City of Phoenix ("City") alleging that the City negligently failed to ensure that the streetlight at the intersection worked. The City had contracted with Arizona Public Service Company ("APS") to maintain the streetlight in question. Id. at 627. Over the plaintiff's objection, the City named APS as a non-party at fault. Id. at

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626. The jury returned a defense verdict. Id. at 627. Plaintiff filed a motion for a new trial. Id. at 627. In granting plaintiff's request, the trial court acknowledged it erred in refusing to instruct the jury that the City was vicariously liable for APS's actions. Id. The City appealed, and the Court of Appeals reversed. Id. The appellate court held that the City was not vicariously liable for APS's negligence; therefore, there was no error. Id. Plaintiff appealed from that decision. On appeal, the Arizona Supreme Court reversed the Court of Appeals. Id. at 629. The Supreme Court held that because the City was vicariously liable for APS's conduct the trial court had committed reversible error. Id. at 628. The court remanded the case for a new trial. Id. at 629. On remand, the court directed that APS not be named as a non-party at fault. Id. "[I]n a case of vicarious liability, it does not make legal or tactical sense to name as a non-party at fault, the party whose conduct is imputed to the employer, because the employer will be fully liable for the fault." Id. Explaining further, the court noted, "[f]rom the [plaintiff's] perspective, allocation [of fault] is irrelevant ­ with or without an allocation, the City is 100% liable. From the [City's] perspective, an allocation of fault to a non-party is irrelevant because A.R.S. § 12-2506(B) precludes the use of such a finding in any later action brought by the City against APS for indemnity." Id. As in Wiggs, if Omron (the defendant) is found liable by the jury at trial, any allocation of fault to Verve (the potential non-party) has no bearing on Omron's liability ­ Omron is jointly and severally liable with Verve. Further, Omron would not be allowed to rely on the allocation of fault in a later action brought by it against Verve. See A.R.S. § 12-2506(B). Therefore, as in Wiggs, it "does not make legal or tactical sense" to allow the defendant, Omron, to name a non-party at fault. For this reason, as well as that Omron's notice of non-party at fault is untimely, Omron's request should be denied.

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CONCLUSION For the foregoing reasons, Hypercom Corporation respectfully requests that the

deny Omron's untimely and futile Motion for Leave to Designate Potential Non-Parties at Fault. RESPECTFULLY SUBMITTED this 23rd day of April, 2007. SNELL & WILMER L.L.P.

By s/ Sid Leach Sid Leach Monica A. Limón-Wynn SNELL & WILMER L.L.P. 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 April 23, 2007, I electronically transmitted HYPERCOM CORPORATION'S RESPONSE IN OPPOSITION TO OMRON CORPORATION'S MOTION FOR LEAVE TO DESIGNATE POTENTIAL NON-PARTIES AT FAULT Opposition to the Clerk's Office using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants: 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 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 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

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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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