Free Motion in Limine - District Court of Arizona - Arizona

Matthew A. C. Zapf (pro hac vice) A. Colin Wexler (pro hac vice) GOLDBERG KOHN 55 East Monroe Street, Suite 3300 Chicago, IL 60603-5792 Telephone: 312.201.3914 Facsimile: 312.863.7414 [email protected] [email protected] David P. Irmscher (15026-02) John K. Henning (25203-49) BAKER & DANIELS LLP 111 East Wayne Street, Suite 800 Fort Wayne, IN 46802 Telephone: 260-424-8000 Facsimile: 260-460-1700 [email protected] [email protected] H. Michael Clyde (009647) PERKINS COIE BROWN & BAIN P.A. 2901 North Central Avenue, Suite 2000 Phoenix, AZ 85012-2788 Telephone: 602.351.8000 Facsimile: 602.648.7000

[email protected]

Attorneys for Defendant Omron Corporation UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. ) ) ) ) ) ) ) ) ) ) ) CAUSE NO. CV04-0400 PHX PGR DEFENDANT OMRON CORPORATION'S MOTION IN LIMINE NO. 6 TO EXCLUDE EVIDENCE RELATED TO PUNITIVE DAMAGES (Oral Argument Requested)

Omron Corporation, Defendants.

The defendant, Omron Corporation ("Omron"), respectfully moves the Court for an order excluding any evidence related to punitive damages, including but not limited to,

Case 2:04-cv-00400-PGR

Document 169

Filed 04/13/2007

Page 1 of 10

net wealth of the defendant, because Hypercom cannot prove a prima facie case that comes close to satisfying the standard for punitive damages. Assuming that the lawsuits filed against Hypercom were baseless and lacked an adequate pre-filing investigation, there is no evidence in the record that Omron knew this, much less that Omron intentionally permitted Verve to file baseless lawsuits. In fact, Doug Reich, Hypercom's corporate representative, affirmatively testified that Hypercom could not provide any evidence on much of Omron's allegedly tortious conduct. As this Court well knows, the inclusion of punitive damages gives a jury substantial discretion to impose an exorbitant punishment on a defendant, raising the stakes of litigation considerably. There is no evidence of an "evil mind" by Omron, and Hypercom should not be permitted to ask the jury to impose such an enormous penalty in the absence of any prima facie evidence justifying their inclusion. Juries may consider the defendants' wealth in determining a punitive damage award, so given that Omron is a large multi-national corporation, the potential stakes to Omron would become unjustifiably large. A. Arizona Law Only Permits The Imposition Of Punitive Damages In Rare Cases Where The Plaintiff Can Prove By Clear And Convincing Evidence That The Defendant Acted With An "Evil Mind"

Punitive damages in this case are unwarranted because Hypercom cannot present any evidence that Omron's actions are "something more" than the conduct necessary to satisfy the elements of Hypercom's claims or that Omron acted with an "evil mind." The Arizona Supreme Court has made clear that punitive damages are an "extraordinary civil remedy [ ] which should be appropriately restricted to only the most egregious of wrongs." Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 331, 723 P.2d 675, 680

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(1986). "Gross negligence," or even "reckless disregard of the circumstances," are not sufficient, as these standards only "overextend [] the availability of punitive damages, and dull [] the potentially keen edge of the doctrine as an effective deterrent of truly reprehensible conduct.'" Id. The proper standard for punitive damages is whether Omron acted with an "evil mind": only when the wrongdoer should be consciously aware of the evil of his actions, or the spitefulness of his motives or that his conduct is so outrageous, oppressive or intolerable in that it creates a substantial risk of tremendous harm to others that the evil mind required for the imposition of punitive damages may be found. Linthicum, 150 Ariz. at 330, 723 P.2d at 679. Thus, before a jury may award punitive damages, "there must be evidence of an 'evil mind' and aggravated and outrageous conduct." Id. There is no evidence in the record that Omron had an "evil mind" or engaged in aggravated and outrageous conduct by assigning the patents to Verve. Accordingly, the Arizona Supreme Court has held that to justify an award of punitive damages, a plaintiff must do more than simply demonstrate that the defendant engaged in the conduct comprising the tort. Even if the jury concludes that Omron assisted Verve in its alleged malicious prosecution or abuse of process, Hypercom needs to show that Omron did "something more" than just commit the tort. E.g., Rawlings v. Apodaca, 151 Ariz. 149, 160, 726 P.2d 565, 576 (1986); Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 723 P.2d 675, (Ariz. 1986) ("To recover punitive damages something more is required over and above the 'mere commission of a tort.'"); see also Piper v. Bear Medical Systems, Inc., 180 Ariz. 170, 180, 883 P.2d 407, 417 (Ct. App. 1993) (holding punitive damages not warranted where manufacturer's continued

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marketing of product may have been negligent, but did not evidence "something more"). The record in this case is devoid of any evidence of this "something more." B. Hypercom's Evidence Does Not Demonstrate "Something More" Than The Commission Of A Tort

In this case, that "something more" must involve something other than what is necessary to meet Hypercom's burden of proof on the conspiracy, malicious prosecution, and aiding and abetting claims. A malicious prosecution claim requires proof that Omron was the instigator of a civil action motivated by malice and without probable cause. Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 417, 758 P.2d 1313, 1319 (1988). For a conspiracy claim, Hypercom must prove that Omron and Verve participated in a scheme to file baseless lawsuits. Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 498, 38 P.3d 12, 36 (2002). An aiding and abetting claim requires proof that Omron substantially assisted Verve in committing a tort, i.e, there must be proof of an intent to file baseless lawsuits. Wells Fargo Bank, 201 Ariz. at 485, 38 P.3d at 23. Therefore, under Linthicum and Rawlings, supra, Hypercom cannot proceed with a punitive damages claim even if they prove that (1) Omron knew the lawsuits were baseless when filed, (2) instituted these actions against Hypercom with malice, or (3) Omron had the intent to aid and abet Verve with baseless lawsuits. Such evidence would only prove the knowledge and intent elements of the torts. "Something more" is required to argue punitive damages to the jury. As discussed Motion in Limine No. 4, Hypercom has admitted that it could not identify any evidence about, for example, the following areas:

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"[Hypercom's] understanding that Omron had approved Hypercom as a target [of the lawsuits]." Deposition of Hypercom's Rule 30(b)(6) Corporate Representative ("Hypercom Depo.") at 66:16-67:12, attached as Exhibit A to Motion In Limine No. 4.

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"evidence of an unwritten agreement that Omron could veto the lawsuit[s]" or "approve targets prior to filing." Id. at 71:1372:20.

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evidence supporting an alleged conspiracy. Id. at 76:12-24. any evidence or facts that Omron approved of Verve's litigation tactics, including the approval of Hypercom as a defendant in any lawsuits, knowledge of lawsuits that Verve intended to file, failing to stop Verve from suing Hypercom, and filing lawsuits in inconvenient forums. Id. at 82:22-83:18.

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evidence supporting the claim that Omron could veto any lawsuits. Id. at 84:20-85:3.

In light of Hypercom's admissions, it is clear that Hypercom lacks sufficient knowledge to support a claim of punitive damages against Omron. Hypercom should not be permitted to seek an enormous punitive damages award against Omron despite Hypercom's admitted absence of knowledge of Omron's involvement in Verve's activities. For the same reasons further explained below, Hypercom cannot prove the "something more" element for punitive damages.

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C.

Hypercom Has No Evidence Of An "Evil Mind" Or Aggravated Or Outrageous Conduct

In evaluating punitive damages, the inquiry should be focused on the wrongdoer's mental state. Linthicum, 150 Ariz. 326, 723 P.2d at 679. In cases where the plaintiff can present no direct evidence that the defendant consciously intended to harm the plaintiff, the defendant's conduct must be evaluated for outrageousness, egregiousness, or some element of outrage. In this case, there simply is no direct evidence that Omron acted with the requisite "evil mind." Hypercom cannot present any evidence, and none exists, demonstrating that Omron knew Verve filed baseless patent infringement lawsuits or failed to conduct an adequate pre-filing investigation. Moreover, there is no evidence that Omron knew that Verve would undertake a course of action that arguably violated state law and constituted abuse of process and malicious prosecution. Without clear and convincing evidence of such knowledge, there can be no "evil mind." Hypercom most likely will argue that Omron had a duty to conduct its own prefiling investigation because Omron should have known that the assignment agreements did not provide sufficient rights to Verve such that Verve would have standing to file the lawsuits. This is nothing more than Hypercom's legal arguments that Omron and Verve's position on standing was frivolous and made in bad faith, an argument already rejected by the International Trade Commission. See Order No. 48 at 21-22, attached as Exhibit A to this Motion. Omron's position always has been that the assignment agreements provided sufficient rights in the patents to Verve so that Verve would have standing. But even if Omron's position on this standing issue is wrong, this interpretation of the assignment agreements cannot support an award of punitive damages.

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Hypercom may also argue that Omron had a duty to stop Verve's lawsuits after learning that Hypercom's products do not infringe the Omron-assigned patents. However, no case law suggests that a patent assignor is responsible for the conduct of an assignee, even in instances where the assignor is receiving some benefit from the assignee's post-assignment conduct. If a party cannot be found liable for punitive damages for misinterpreting existing case law on the existence of a duty, surely a party cannot be found liable in the absence of any case law recognizing a duty. Futhermore, with respect to the abuse of process claim, Arizona law does not recognize an abuse of process claim for failing to terminate litigation, even after allegedly becoming aware that the lawsuit is baseless. Morn v. City of Phoenix, 152 Ariz. 164, 168, 730 P.2d 873, 877 (Ct. App. 1986). D. Without Prima Facie Evidence, Hypercom Should Not Be Permitted To Introduce Evidence Related To Punitive Damages, Including Evidence Relating To Omron's Wealth and Resources

In cases where punitive damages are not at issue, evidence related to the wealth and resources of the defendant is typically inadmissible. The rationale for this rule is two-fold. First, this evidence is not relevant to whether the defendant is liable for tortious conduct. Second, introducing evidence regarding the defendant's wealth may improperly influence the jury's liability determination and the size of the compensatory damages award. However, when punitive damages are at issue, evidence related to the wealth of the defendant is admissible to help the jury determine an amount that will appropriately punish the defendant. In this case, though, the evidence supporting a claim for punitive damages is non-existent. Therefore, it would be unfairly prejudicial to permit Hypercom

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to present any evidence to the jury on the issue of punitive damages because that evidence may be used by the jury to calculate compensatory damages. Without evidence of this knowledge, or any evidence that Verve was acting at Omron's direction, Omron cannot possess an intent to harm Hypercom or an "evil mind." Omron's conduct, therefore, falls far short of acting with the "evil mind" required for an award of punitive damages. Hypercom should be precluded from offering any evidence of punitive damages. E. Hypercom Should Be Excluded From Offering Any Evidence Of Verve's Conduct Toward Other Parties

The U.S. Supreme Court recently held in Philip Morris v. Williams, 127 S. Ct. 1057, 1063 (2007), that punitive damages may not be awarded to punish a defendant for conduct directed at non-parties. "[T]he Constitution's Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent." Id. If Hypercom is permitted to seek punitive damages against Verve, it should not be permitted, under Philip Morris, to introduce evidence of the suits Verve brought against the other defendants in support of Hypercom's punitive damages. CONCLUSION For the reasons discussed above, Omron respectfully moves the Court for an order excluding any evidence related to punitive damages, including but not limited to, net wealth of the defendant, or in the alternative, the Court should prevent Hypercom from introducing evidence of Verve's suits against other defendants to support its punitive damages claims.

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RESPECTFULLY SUBMITTED on April 13, 2007.

By: /s/ Matthew A.C. Zapf Matthew A.C. Zapf A. Colin Wexler GOLDBERG KOHN 55 East Monroe Street Suite 3300 Chicago, IL 60603-5792 David P. Irmscher (15026-02) John K. Henning (25203-49) BAKER & DANIELS LLP 111 East Wayne Street Suite 800 Fort Wayne, IN 46802 H. Michael Clyde (009647) PERKINS COIE BROWN & BAIN P.A. 2901 North Central Avenue Suite 2000 Phoenix, AZ 85012-2788 Attorneys for Defendant Omron Corporation

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CERTIFICATE OF SERVICE I hereby certify that on April 13, 2007, I electronically transmitted the attached documents 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: Andrew Foster Halaby Ray Kendall Harris John Kenyon Henning, IV David P. Irmscher Sid Leach Monica Anne Limon-Wynn Paul Moore A. Colin Wexler Matthew A.C. Zapf [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

I hereby certify that on April 16, 2007, I caused the attached document to be served by hand delivery on Judge Paul G. Rosenblatt, United States District Court of Arizona, 401 West Washington Street, Phoenix, Arizona 85003-2118.

/s/ Lisa M. Sandoval

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