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 the defendant, Omron Corporation UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Omron Corporation, ) ) ) ) ) ) ) ) ) ) ) CAUSE NO. CV04-0400 PHX PGR DEFENDANT OMRON CORPORATION'S MOTION IN LIMINE NO. 5 TO PREVENT HYPERCOM FROM RELITIGATING CLAIMS AGAINST OMRON (Oral Argument Requested)

Defendants.

The plaintiff, Hypercom Corporation, originally filed this lawsuit against the defendant, Omron Corporation, and another co-defendant, Verve L.L.C., alleging that Omron and Verve

Case 2:04-cv-00400-PGR

Document 167

Filed 04/13/2007

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conspired to file baseless patent infringement lawsuits. In the beginning stages of discovery, Hypercom strategically dismissed its claims against Verve in this case, and re-filed those allegations as counterclaims in another case against Verve pending before Judge Martone. See Hypercom Corp. v. Verve, L.L.C., Case No. CV-05-0365-PHX-FJM. The reason for Hypercom's decision to split the defendants apart is clear - Hypercom wanted two different opportunities to try its case against Omron and Verve. Now that Hypercom has already tried its case against Verve, Hypercom wants to re-litigate those same issues in this Court and try to better the result. However, the principles of collateral estoppel and judicial efficiency set forth in Bridgestone/Firestone North America Tire, L.L.C. v. Naranjo, 206 Ariz. 447, 79 P.2d 1206 (Ct. App. 2003), dictate that Hypercom should not be permitted to re-litigate any issues already decided by another Arizona judge and jury. Hypercom should be collaterally estopped from seeking greater damages than those it recovered in the Hypercom/Verve matter. Accordingly, Omron respectfully requests that in accordance with Judge Martone's rulings in the Hypercom/Verve case, this Court should (a) cap Hypercom's damages at the amount established during the Hypercom/Verve case and (b) prevent Hypercom from recovering damages for the ITC Administrative Action. I. A. ARGUMENT

Hypercom Should Be Collaterally Estopped From Re-Litigating Any Issue Litigated And Decided By The Trial Court And Jury In Its Prior Case Against Verve Under well-established Arizona law, collateral estoppel prevents a party from re-

litigating claims "'when the issue or fact to be litigated was actually litigated in a previous suit, a final judgment was entered, and the party against whom the doctrine is to be invoked had a full opportunity to litigate the matter and actually did litigate it, provided such issue or fact was essential to the prior judgment.'" Bridgestone/Firestone, 206 Ariz. at 452, 79 P.2d at 1211 -2Case 2:04-cv-00400-PGR Document 167 Filed 04/13/2007 Page 2 of 12

(citing F.D.I.C. v. Adams, 187 Ariz. 585, 593, 931 P.2d 1095, 1103 (Ct. App. 1996), and Chaney Building Co. v. City of Tucson, 148 Ariz. 571, 573, 716 P.2d 28, 30 (1986)). If these elements are satisfied, "Arizona permits a new defendant in a subsequent case to use the doctrine defensively to preclude relitigation of an issue." Id. (citing Standage Ventures, Inc. v. State, 114 Ariz. 480, 484, 562 P.2d 360, 364 (1977), and Campbell v. SZL Props., Ltd., 204 Ariz. 221, ¶ 10, 62 P.3d 966, ¶ 10 (Ct. App. 2003). 1. In Bridgestone, the Arizona Court of Appeals Recently Applied Defensive Collateral Estoppel Against a Repeat Plaintiff In a Very Similar Procedural Posture

The Arizona Court of Appeals' decision in Bridgestone/Firestone, 206 Ariz. 447, 79 P.2d 1206, is instructive and directly on point. In Bridgestone/Firestone, the plaintiffs were involved in a serious car accident after a tire on their rental van failed, causing the van to roll over. The plaintiffs sued the car rental agency, A.P.S. Rent-A-Car & Leasing, on theories of negligence and strict liability. The plaintiffs did not name, however, the manufacturer of the tire, Bridgestone, and even opposed A.P.S.'s motion to join Bridgestone as a third-party defendant. Id. at 448, 79 P.3d at 1207. The plaintiffs proceeded to trial on their claims and obtained a judgment against A.P.S. Before the trial against A.P.S., the plaintiffs asserted claims against Bridgestone in a separate action. After the trial against A.P.S. had concluded, Bridgestone filed a motion for summary judgment on the plaintiffs' separate claims, arguing that collateral estoppel and satisfaction of the prior judgment precluded the plaintiffs' claims against Bridgestone. The trial court agreed and granted summary judgment. On appeal, the Arizona Court of Appeals affirmed the decision, holding that principles of collateral estoppel and public policy prevented the plaintiffs from

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relitigating their claims against a joint tortfeasor who should have been joined by the plaintiffs in the first trial against A.P.S. Id. at 452-53, 79 P.3d at 1211-12. For the same reasons expressed in Bridgestone/Firestone, and as demonstrated further below, Hypercom should be collaterally estopped from seeking greater damages than what it recovered in the Hypercom/Verve matter; its damages with respect to the claims adjudicated there should be capped at the amount awarded in that case.1 Moreover, this Court should preclude Hypercom from pursuing its claims related to the administrative proceedings in the International Trade Commission based on the District Court's dismissal of those same claims in Hypercom Corp. v. Verve, L.L.C., Case No. CV-05-0365. 2. Defensive Collateral Estoppel Is Very Different From Offensive Collateral Estoppel

One important point about collateral estoppel merits particular mention: the application of collateral estoppel is different depending on who seeks to invoke the doctrine. In this Motion, Omron proposes that the Court utilize defensive collateral estoppel to estop Hypercom from relitigating the issues litigated and resolved in the prior trial against Verve. Hypercom should not be permitted, however, to offensively use collateral estoppel against Omron with respect to any of Hypercom's claims, because Omron has never had an opportunity to defend the claims filed by Hypercom. Under Arizona law, collateral estoppel "is applicable when the issue or fact to be litigated was actually litigated in a previous suit, a final judgment was entered, and the party against whom the doctrine is to be invoked had a full opportunity to litigate the matter and actually did litigate it, provided such issue or fact was essential to the prior judgment." Bridgestone/Firestone, 206 Ariz. at 145, 79 P.3d at 1211. Defensive collateral estoppel occurs
1

This damages cap should not, of course, prevent Omron from contesting the fact that Omron's damages should be lower than those Judge Martone awarded, since Omron did not have a chance to contest Hypercom's damages in the prior proceeding.

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when a defendant seeks to prevent a plaintiff from asserting a claim the plaintiff previously litigated against another party in a different action. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.4 (1979). Offensive collateral estoppel, on the other hand, applies when a plaintiff seeks to prevent a defendant from relitigating an issue the defendant previously litigated in an action with another party. Id. In this case, offensive collateral estoppel cannot be applied to Omron because Omron has not had an opportunity to litigate these claims in any forum at all. See Richards v. Jefferson County, 517 U.S. 793, 794 (1996) (Due Process clause forbids courts from "bind[ing] litigants to a judgment to which they were not parties and in which they were not adequately represented."); Blonder-Tongue Labs, Inc. v. University of Ill. Found., 402 U.S. 313, 328 (1971) ("Some litigants - those who have never appeared in a prior action - may not be collaterally estopped without litigating the issue."). For various reasons discussed below, the Arizona Supreme Court has discussed important public policy principles for courts to discourage plaintiffs like Hypercom from pursuing the same kinds of claims against defendants in different proceedings. Having already had its day in court against Verve, Hypercom cannot be heard to complain that it cannot have another opportunity to re-litigate all of its claims in this Court. On the other hand, Omron deserves - as mandated by the Due Process clause - the opportunity to defend itself. B. Collateral Estoppel Applies Here Because All Claims Against Omron In This Case Were Litigated And Decided In Hypercom's Prior Lawsuit Against Verve 1. Hypercom Should Not Be Permitted To Re-Litigate Its Damages Claims For The Michigan, California, And Texas Actions Against Omron

Hypercom has already completed one jury trial against Verve in this District Court for Hypercom's damages allegedly caused by Verve's filing of lawsuits in Michigan, California, and

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Texas. Under Bridgestone/Firestone, one trial on damages is enough. Hypercom should not be permitted to retry those damages claims against Omron. All of the elements of collateral estoppel are met here. First, the issue of damages caused by Verve's conduct in filing the Michigan, California, and Texas lawsuits was actually litigated in the prior Hypercom/Verve lawsuit. Following a full week-long trial, a jury awarded approximately $223,500 in compensatory damages to Hypercom. Second, final judgment on that verdict was entered on January 9, 2007. And finally, Hypercom had a full opportunity to litigate the issue of damages. See Bridgestone/Firestone, 206 Ariz. at 452, 79 P.2d at 1211 (listing elements of collateral estoppel). The damages in both cases are identical, i.e., Hypercom's attorneys' fees and expenses paid to defend the lawsuits filed by Verve. Hypercom sought the full measure of damages against Verve. Hypercom cannot retry those damages claims here. Bridgestone/Firestone, 206 Ariz. at 452, 79 P.3d at 1211 (precluding relitigation of damages claims that were the same against both defendants where total damages arising from tortious conduct was fully litigated in earlier trial). Moreover, because Hypercom's damages claims were fully litigated, the jury verdict in the Hypercom/Verve case "'caps any verdict which might be rendered'" in this case. Id. (citing Kathios v. General Motors Corp., 862 F.2d 944, 946 (1st Cir. 1988)). 2. Hypercom Should Be Precluded From Seeking Damages Related To The ITC Administrative Action

In addition to resolving the damages claims related to the California, Michigan, and Texas Actions, the District Court in the Hypercom/Verve lawsuit also issued final judgments on Hypercom's claims related to the ITC Administrative Action, dismissing those claims on summary judgment. Hypercom should not be permitted to pursue those same claims against Omron in a different court. -6Case 2:04-cv-00400-PGR Document 167 Filed 04/13/2007 Page 6 of 12

In the Hypercom/Verve lawsuit, Verve moved for summary judgment on Hypercom's claims related to the ITC Administrative Action. Judge Martone granted summary judgment to Verve on Hypercom's malicious prosecution and abuse of process claims related to the ITC. On the abuse of process claim, the court held that because Arizona law limited "process" to "'court procedures incident to the litigation process,'" "[Verve's] actions related to the ITC administrative proceedings cannot form the basis of an abuse of process claim." See August 16, 2006, Order at 9, attached as Exhibit A to this motion (citing Nienstedt v. Wetzel, 133 Ariz. 348, 353, 651 P.2d 876, 881 (Ct. App. 1982). The court, therefore, dismissed Hypercom's abuse of process claim with prejudice. Id. at 9. Collateral estoppel bars Hypercom from relitigating the same issue here. A summary judgment on an issue litigated in a prior case is a final judgment on the merits for purposes of collateral estoppel. Kourtis v. Cameron, 419 F.3d 989, 994 (9th Cir. 2005); see also Jackson v. Hayakawa, 605 F.2d 1121, 1125 n.3 (9th Cir. 1979). Hypercom had a full opportunity to litigate (and did litigate) whether Arizona law permitted abuse of process claims based on actions and conduct in an administrative proceeding. This District Court held in the Hypercom/Verve lawsuit that such abuse of process claims were not permitted under Arizona law, and dismissed those claims with prejudice. Order at 9. Principles of collateral estoppel, specifically as set forth in Bridgestone/Firestone, dictate that this Court not permit Hypercom to proceed on the same claim against Omron. For the same reasons, Hypercom should not be permitted to pursue its claims for malicious prosecution against Omron. This District Court also granted summary judgment without prejudice to Verve on the malicious prosecution claims related to the ITC. Order at 8. After Hypercom and Verve briefed this issue on summary judgment, the court held that because

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the ITC action was being appealed, "there has been no final judgment in favor of Hypercom, and these actions cannot yet form the basis of a malicious prosecution claim." Id. (citing Frey v. Stoneman, 150 Ariz. 106, 109-10, 722 P.2d 274, 277-78 (1986)). The malicious prosecution claim, the court held, was not ripe. Collateral estoppel applies to this claim also. Hypercom litigated this claim in the prior lawsuit, and the court dismissed the malicious prosecution claim without prejudice. A dismissal without prejudice may be treated as a final judgment on the merits for purposes of collateral estoppel. Offshore Sportswear, Inc. v. Vuarnet Int'l, B.V., 114 F.3d 848, 851 (9th Cir. 1997). Moreover, Hypercom's claims for malicious prosecution related to the ITC are still not ripe today for the same reasons this District Court held they were not ripe previously - there is a pending appeal in the ITC involving Hypercom and Verve. Therefore, Hypercom should be estopped from pursuing this claim against Omron based on the same rationale applied by this Court in the prior lawsuit: there has been no final judgment in favor of Hypercom. Order at 8. C. Arizona Public Policy Dictates That This Trial Be Limited To Determining Whether Omron Is Liable For Damages Related To The California, Michigan, And Texas Actions Permitting Hypercom to proceed with this trial and relitigate the claims previously decided in the Hypercom/Verve lawsuit also contravenes Arizona's public policy. The Arizona Court of Appeals recently reaffirmed long-standing Arizona policy favoring the joinder of all known and available tortfeasors as defendants in one action. Bridgestone/Firestone, 206 Ariz. at 453, 79 P.3d at 1212; see also United States Fid. & Guar. Co. v. Alfalfa Seed & Lumber Co., 38 Ariz. 48, 52-53, 297 P. 862, 864 (1931) ("Unquestionably the policy of our law is to determine the rights of all parties to a controversy in one suit, if possible."); Ariz. Title Ins. & Trust Co. v. Kelly, 11 Ariz.App. 254, 255, 463 P.2d 838, 839 (1970) ("The Rules of Civil Procedure, both

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before and after the extensive amendments [of] ... 1966, encourage the joinder of all appropriate parties in a single suit to avoid multiplicity of litigation."); see also Staffco, Inc. v. Maricopa Trading Co., 122 Ariz. 353, 357, 595 P.2d 31, 35 (1979) ("The thrust of ... [joinder] rules is that, whenever possible, all claims should be disposed of in one action."); Bill Alexander Ford, Lincoln, Mercury, Inc. v. Casa Ford, Inc., 187 Ariz. 616, 618, 931 P.2d 1126, 1128 (Ct. App. 1996) (under Restatement (Second) of Judgments § 29, plaintiff could not seek additional damages in subsequent action against defendant when plaintiff had "had the opportunity to litigate all such claims" in earlier action against other defendants). In addition, "'[c]oncerns relating to judicial economy also militate against allowing plaintiffs to litigate their cases over and over, against one defendant at a time.'" Bridgestone/Firestone, 206 Ariz. at 453, 79 P.3d at 1212. It does not matter that Omron was not a party to the action before Judge Martone. In Bridgestone/Firestone, the plaintiffs argued that "Arizona law permits them to sue multiple defendants in serial actions for their damages arising from the [tort]." Bridgestone/Firestone, 206 Ariz. at 450, 79 P.3d at 1209. The plaintiffs further sought to "'assert independent claims against Bridgestone Firestone for compensatory and punitive damages,'" and "demand[ed] their 'day in court' against Bridgestone." Id. The court rejected both arguments as unsound because the plaintiffs had already litigated and tried their claims against Bridgestone Firestone's joint tortfeastor on all injuries and damages resulting from the allegedly tortious conduct. Id. The plaintiffs further could not explain "how their damages caused by Bridgestone's alleged fault differ from the damages resulting from A.P.S.'s fault." Id. This case presents the exact circumstances addressed by the Arizona Court of Appeals in Bridgestone/Firestone. Arizona's public policy of ensuring that the liability of all potential

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tortfeasors be addressed in one trial is contravened where, as here, a plaintiff "is well aware of multiple alleged tortfeasors but deliberately chooses to sue them separately in serial actions for the same injuries and damages." Bridgestone/Firestone, 206 Ariz. at 453-54, 79 P.3d at 121213. Hypercom initially filed its lawsuit against Omron and Verve in this Court. Shortly after discovery began, however, Hypercom made a deliberate and strategic decision to split its case against Omron and Verve and pursue them in separate actions As the Arizona Court of Appeals recently held, "[h]aving known of [Omron's] potential liability and having apparently made a tactical decision not to name it as a defendant in [the trial of] their original action, [Hypercom] may not maintain a new action against [Omron]." Id. at 454, 79 P.3d at 1213. II. CONCLUSION

Hypercom should not be permitted to relitigate issues already decided against it in the prior Hypercom/Verve lawsuit. Collateral estoppel principles, under Arizona law, preclude Hypercom from relitigating (1) the amount of compensatory damages awarded on the California, Michigan, and Texas lawsuits, and (2) liability or damages related to the ITC Administrative Action. Hypercom's damages should be capped at the amount established during the Hypercom/Verve case, but Omron should have the opportunity to challenge whether the damages should in fact be lower.

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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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