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. ) ) ) ) ) ) ) ) ) ) ) ) Cause No. CV04-0400 PHX PGR DEFENDANT OMRON CORPORATION'S MOTION IN LIMINE NO. 2 TO EXCLUDE EVIDENCE OF COMPROMISE

Omron Corporation, Defendant.

Case 2:04-cv-00400-PGR

Document 164

Filed 04/13/2007

Page 1 of 10

The defendant, Omron Corporation respectfully moves this Court to exclude any evidence regarding settlement negotiations between Omron and the plaintiff, Hypercom Corporation, during the pendency of this action as inadmissible evidence of compromise under Rule 408 of the Federal Rules of Evidence. Specifically, the Court should exclude any evidence, including any testimony, documents, and presentation materials, related to the September 16, 2004, settlement conference ("Settlement Conference") attended by Omron and Hypercom. For the reasons discussed below, this evidence should also be excluded in accordance with Federal Rules of Evidence ("Rules") 402, 403, and 602. The parties have already briefed this issue before this Court, but the motion was not ruled on because it was moot. At that time, Hypercom explained that Rule 408 "is designed to encourage a party to let its guard down and speak freely without fear that its own statements will be used against it." See Hypercom Corporation's Opposition To Omron's Motion To Strike Evidence Of Compromise, filed January 30, 2006, at 11. Omron agrees. Hypercom lured Omron to a meeting with false promises that Hypercom was interested in resolving disputes and discussing licenses, but Hypercom was merely interested in luring Omron into a trap. Hypercom promised Omron that all of the discussions at the settlement meeting would be subject to a confidentiality agreement. Omron respectfully requests that this Court exclude all evidence relating to the September 16, 2004, Settlement Conference, in accordance with Omron's express agreement and Rule 408.

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I. A.

ARGUMENT

Hypercom Agreed That All Statements Made During The Settlement Conference Were Subject To Rule 408 Hypercom filed its First Amended Complaint in this Court on June 12, 2004. In

the First Amended Complaint, Hypercom named Omron as a co-defendant to a pending action by Hypercom against Verve L.L.C. and claimed that Omron and Verve engaged in a civil conspiracy to file baseless patent infringement lawsuits against Hypercom. On September 16, 2004, at Hypercom's request, representatives of Omron met with representatives of Hypercom in Phoenix, Arizona. The specific purpose of this meeting was to discuss potential settlement terms between Omron, Hypercom, and Verve. Prior to the Settlement Conference, Hypercom agreed in writing that all communications between Omron and Hypercom would be subject to Federal Rule of Evidence 408: We hope that these discussions may lead to a global settlement of all Omron patents, including those now in the hands of Verve. All discussions will be subject to a confidentiality agreement, and we will agree that these are settlement discussions subject to Rule 408 of the Federal Rules of Evidence. See Correspondence from Hypercom's counsel, dated September 8, 2004, attached as Exhibit A to this Motion (emphasis added). In addition, during the Settlement Conference, Hypercom claims that it showed Omron a slideshow presentation, the first page of which bears the statement, "Presented in accordance with F.R.C.P. 408." See Slideshow Presentation, Exhibit B to this Motion. Throughout this litigation, however, Hypercom has ignored its pledge and Rule 408, repeatedly offering statements and information culled from the Settlement Conference as proof of the alleged conspiracy between Omron and Verve. Hypercom submitted with its opposition to Omron's First -3Case 2:04-cv-00400-PGR Document 164 Filed 04/13/2007 Page 3 of 10

Motion For Summary Judgment the following evidence related to the Settlement Conference: (1) (2) a presentation which Hypercom purports to have prepared for and given during the Settlement Conference; a declaration of Douglas J. Reich, in-house counsel for Hypercom, which purports to disclose evidence of conduct and statements made during the Settlement Conference; and, testimony of Mr. Reich and Tetsuyuki Nakano, Omron's designated corporate representative who was present at the Settlement Conference.

(3)

In addition, in opposition to Omron's Second Motion For Summary Judgment, the only evidence Hypercom could cite as proof that Omron had the requisite knowledge that Verve was filing baseless patent infringement lawsuits (which is required to support all of their claims) was the Settlement Conference itself. See Hypercom Corporation's Response To Omron Corporation's Second Motion For Summary Judgment, at 16. B. Rule 408 Excludes Evidence From Settlement Negotiations Offered To Prove Liability On A Claim Rule 408(a) expressly provides that evidence of conduct or statements made during settlement negotiations is not admissible except in very limited circumstances: Evidence of the following is not admissible on behalf of any party, when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction: (1) furnishing or offering or promising to furnish - or accepting or offering or promising to accept - a valuable consideration in compromising or attempting to compromise the claim; and conduct or statements made in compromise negotiations regarding the claim, . . .

(2)

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Fed. R. Evid. 408 (emphasis added). The Advisory Committee Notes to Rule 408 express two grounds for its exclusion of compromise evidence: "(1) The evidence is irrelevant, since the offer may be motivated by a desire for peace rather than from any concession of weakness of position. . . (2) A more consistently impressive ground is promotion of the public policy favoring the compromise and settlement of disputes." See also U.S. v. Contra Costa County Water Dist., 678 F.2d 90, 92 (9th Cir. 1982) (reciting above principles to hold evidence of settlement negotiations inadmissible); Hudspeth v. C.I.R., 914 F.2d 1207, 1213-14 (9th Cir. 1990) (affirming exclusion of settlement negotiations partially on grounds that admitting negotiations would inhibit parties from engaging in frank settlement talks). Evidence related to the Settlement Conference, including the evidence identified above, should be excluded under Rule 408. Hypercom intends to use statements and evidence from the Settlement Conference to prove (1) that based on statements Omron made at the settlement conference, it was engaged in a conspiracy with Verve, and (2) that Omron learned, based on a presentation allegedly made during the Settlement Conference, that Verve's patent infringement claims against Hypercom were baseless. The express terms of Rule 408, however, exclude this evidence because it qualifies as "conduct or statements made in compromise negotiations regarding the claim." The rationale behind Rule 408 also supports exclusion. Evidence regarding settlement negotiations are inadmissible because there is a strong public policy favoring compromise. Omron attended the settlement conference in response to Hypercom's offer to move forward cooperatively. If Hypercom is permitted to use Omron's presence and statements during the settlement conference against it, it will encourage future litigants in

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Omron's position to avoid settlement conferences for fear that anything they do there might be used against them at a later date. With respect to the presentation Hypercom allegedly showed to Omron, Hypercom now seeks to argue that its presentation put Omron on notice of facts about its patents. Permitting Hypercom to use this presentation against Omron in this context would send a powerful message to future litigants that they should not permit the other side to educate them about the pitfalls of their case during settlement negotiations, for fear that such education could be held against them at a later date. As Hypercom has observed, the purpose of Rule 408 is to foster compromise by encouraging parties to engage in an open dialogue without fear that the other party will later use their words against them. Hypercom's strategy of inviting Omron to a meeting with the hope of securing potential admissions from Omron turns Rule 408 on its head. 1. Testimony Of Hypercom's General Counsel Regarding Oral Statements Made By Omron's Counsel Violate Rule 408 and 801

Turning to one of the specific pieces of evidence that Hypercom seeks to introduce, Hypercom intends to ask Douglas Reich to testify about what Omron said about its ability to settle lawsuits brought by Verve. See, e.g., 12/17/2006 Affidavit Of Douglas Reich ("Reich Affidavit"), attached as Exhibit C to this Motion; see also Hypercom's Response To Motion To Strike, at 4-6. In his affidavit, Mr. Reich offers conclusory and self-serving testimony: During the course of the meeting, Omron's counsel, Herbert Kerner, assured the Hypercom representatives, including me, that Omron could settle all of the patent infringement claims against Hypercom, including those asserted against Hypercom by Verve. He stated in words or substance that Omron could settle on behalf of Verve and could make the various lawsuits filed by Verve "go away".

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First, Mr. Reich's testimony should also be excluded as pure hearsay, and should be excluded in accordance with Evidence Rules 801 and 802. His affidavit recounts an out of court statement offered to prove the truth of the matter asserted: that Herb Kerner claimed Omron could settle all patent infringement claims against Hypercom. Reich Affidavit, attached as Exhibit C. Mr. Reich is unable to state with any specificity what Mr. Kerner said ­ he merely states that Mr. Kerner conveyed Omron's ability to settle the lawsuits "in words or substance." Mr. Reich's testimony should also be excluded in accordance with the policy underlying Rule 408, as discussed above. Even assuming arguendo that Mr. Kerner did claim that Omron could help resolve patent cases against Hypercom, Omron should not now be punished for its attempt to facilitate a resolution. 2. The Slideshow Presentation, And Nakano's Testimony About It, Should Not Be Used to Demonstrate Omron's Knowledge About Whether Verve Had Filed Baseless Lawsuits

Hypercom intends to use the slideshow presentation allegedly made to Omron and Nakano's testimony about the Settlement Conference to prove that Omron was aware of the baselessness of Verve's suits because Hypercom demonstrated to Omron that its products did not violate the patents at issue. See Hypercom's Slideshow Presentation; see also Response To Omron's Motion To Strike, at 6-10.1 The Court should prevent this. First, as discussed in more detail in Motion in Limine No. 8, Hypercom has conceded that Omron's knowledge after the filing of the complaints is irrelevant. Evidence that Hypercom had demonstrated the baselessness of Verve's claims to Omron after Verve already filed its infringement claims is not relevant to proving that Omron had knowledge
1

Hypercom previously argued that this document should be admitted because Hypercom seeks merely to introduce evidence of its own statements. But this argument founders on the fact that Hypercom seeks to introduce the presentation with the intention of proving what Omron learned at the settlement conference, not to prove what Hypercom expressed.

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of baselessness before the lawsuits were filed. It is undisputed that neither Omron nor Verve filed additional lawsuits against Hypercom after the settlement conference. Second, the presentation should be excluded under Rule 408. The slideshow presentation itself makes clear that it was prepared solely for the purposes of settlement negotiation. The first slide in the presentation is clearly marked "Presented in accordance with F.R.C.P. 408." Id. Hypercom should be estopped from proffering this as evidence to prove its claims. Third, any evidence of this presentation should be excluded under Rules 402 and 403 because it is irrelevant and more prejudicial than probative. There is no evidence in the record that Mr. Nakano ever saw the presentation. Furthermore, Hypercom has admitted that there was little conversation during the settlement conference about whether Hypercom's products infringed the patents at issue. See Deposition of Hypercom's Rule 30(b)(6) Corporate Representative ("Hypercom Depo."), at 39:15-40:2, attached as Exhibit D to this Motion ("I am not sure that there was much conversation about the actual infringement because we didn't really go into that much detail about the claims in the patents."). Finally, like Mr. Reich's affidavit, the presentation constitutes pure hearsay, and should be excluded under Rules 801 and 802. Hypercom seeks to introduce into evidence a document it purportedly prepared, and intends to use this document to prove that it conveyed particular information to Omron. This document is not subject to any of the applicable exceptions to the hearsay rule, and should accordingly be excluded.

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II.

CONCLUSION

Hypercom's motives for the Settlement Conference are now clear. Hypercom induced Omron, a party Hypercom had sued in federal district court, to participate in a settlement conference that it pledged would remain confidential. It has now violated that pledge, and its actions violate the basic premise of Rule 408's restrictions on compromise evidence. Based on Rule 408 and the other Rules of Evidence Omron discussed herein, Omron respectfully requests that this Court exclude from trial evidence relating to the settlement conference, including Mr. Reich's affidavit and testimony regarding Mr. Kerner's and Mr. Nakano's statements as well as the settlement presentation attached hereto as Exhibit B. 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 -9Case 2:04-cv-00400-PGR Document 164 Filed 04/13/2007 Page 9 of 10

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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