Free Answer to Counterclaim - District Court of Arizona - Arizona

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Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 (602) 364-7000

BRYAN CAVE LLP, 00145700 George C. Chen 019704 ([email protected]) Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 Telephone: (602) 364-7367 Facsimile: (602) 364-7070 Attorneys for Lexcel, Inc., Lexcel Solutions, Inc., Carl Kubitz, and Flora Kubitz UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Merchant Transaction Systems, Inc., ) ) Plaintiff, ) vs. ) ) Nelcela, Inc., et al., ) Defendants. ) ) ) And Related Counterclaims, Cross-Claims, and ) Third-Party Claims. ) ) No. CIV 02-1954-PHX-MHM LEXCEL, INC.'S ANSWER TO NELCELA, INC., LEN CAMPAGNA, AND ALEC DOLLARHIDE'S COUNTERCLAIMS (Jury Trial Demanded)

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Lexcel, Inc. ("Lexcel") answers Nelcela, Inc., Len Campagna, and Alec Dollarhide's (collectively, "Nelcela") Counterclaims against Lexcel, as follows: 1. In response to paragraph 1, upon information and belief, Lexcel admits that Nelcela, Inc. is an Arizona Corporation with a place of business in Scottsdale, Arizona. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 2. 3. Lexcel admits the allegations contained in paragraph 2. In response to paragraph 3, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. 4. In response to paragraph 4, Lexcel admits that the Court has allowed Lexcel Inc. and Lexcel Solutions, Inc. to enter this lawsuit as intervenor plaintiffs. Lexcel denies that it is the only proper party to this suit. Lexcel lacks sufficient

knowledge or information to form a belief as to the truth of the remaining

Case 2:02-cv-01954-MHM

Document 558

Filed 09/06/2007

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Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 (602) 364-7000

allegations and, on that basis, denies them. 5. In response to paragraph 5, Lexcel admits that Carl Kubitz and Flora Kubitz (collectively, the "Kubitzes") are married, reside in Maricopa County, Arizona, are officers of Lexcel, Inc., and acted on behalf of their marital community. Lexcel denies the remaining allegations regarding Lexcel. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 6. In response to paragraph 6, the allegations regarding Lexcel are conclusions of law for which no response is required, but to the extent Lexcel is required to respond, Lexcel denies such allegations. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 7. In response to paragraph 7, to the extent the allegations are not conclusions of law such that a response is required, Lexcel denies the allegations regarding Lexcel. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 8. In response to paragraph 8, Lexcel realleges its responses to Paragraphs 1 through 7, above, and paragraphs 9 through 122, below. Lexcel is not required to respond to Nelcela's other pending Counterclaims and Third Party Complaint(s) on file in this Litigation, but to the extent Lexcel was required to respond and/or did respond, Lexcel hereby incorporates its responses. Lexcel lacks sufficient

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10. 9.

knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. In response to paragraph 9, Lexcel admits that this court has jurisdiction over this matter and that this court is the proper forum for Nelcela's present counterclaims against Lexcel. In response to paragraph 10, Lexcel admits Alec Dollarhide ("Dollarhide") is a

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computer programmer. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 11. In response to paragraph 11, upon information and belief, Lexcel admits Dollarhide was hired by Credit Card Services, Ltd. ("CCS Ltd.") as a computer programmer. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 12. In response to paragraph 12, Lexcel admits CCS Ltd. initially contracted Lexcel, Inc. to develop a certain personal computer switching device and a core technology that could process credit card transactions and that could be extended to also process debit card transactions and device drivers, including terminal drivers. Lexcel denies the remaining allegations, if any. 13. In response to paragraph 13, Lexcel admits that Carl Kubitz is the president of Lexcel, Inc. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 14. In response to paragraph 14, Lexcel admits that Dollarhide worked in Lexcel, Inc.'s office and that Carl Kubitz and Dollarhide worked on software licensed to CCS Ltd. by Lexcel, Inc. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 15. In response to paragraph 15, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. 16. In response to paragraph 16, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. 17. In response to paragraph 17, Lexcel admits that CCS, Ltd. had a dispute and filed suit in or about June 1995 in Nevada against Lexcel, Inc. regarding Lexcel, Inc.'s core technology, as explained in response to paragraph 12, which response is incorporated herein by reference. Lexcel denies the remaining allegations, if any.

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18.

In response to paragraph 18, Lexcel admits that CCS, Ltd and Lexcel, Inc. signed a written Settlement Agreement that was drafted at least in part by their lawyers and that settled at least some of their claims on or about July 17, 1995. To the extent Lexcel had any claims against Nelcela, Inc., Len Campagna, or Alec Dollarhide at that time, Lexcel admits that the settlement did not settle any such claims. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them.

19.

In response paragraph 19, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them.

20.

In response to paragraph 20, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them.

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26. 25. 24. 23. 22. 21.

In response to paragraph 21, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. In response to paragraph 22, Lexcel denies that Nelcela holds valid copyrights for the Nelcela Merchant System or the Nelcela Authorization System because a jury in this lawsuit found Lexcel, Inc. to be the owner of the Merchant System and the Authorization System, among other systems, on April 25, 2007. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. In response to paragraph 23, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. In response to paragraph 24, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. In response to paragraph 25, Lexcel admits Carl Kubitz met with Dollarhide and Len Campagna ("Campagna") in May 1999. allegations. In response to paragraph 26, Lexcel admits that Carl Kubitz met with Dollarhide Lexcel denies the remaining

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and Campagna in May 1999. Lexcel denies the remaining allegations. 27. 28. Lexcel denies the allegations contained in paragraph 27. In response to paragraph 28, Lexcel admits that the Lexcel software has processed credit card transactions, and that Lexcel, Inc. created software for the processing of merchants' credit card transactions. Lexcel denies the remaining allegations, if any. 29. In response to paragraph 29, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. 30. In response to paragraph 30, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. 31. In response to paragraph 31, Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, denies them. 32. In response to paragraph 32, Lexcel admits that, in or about April 2001, Mary Gerdts met with Carl Kubitz. Lexcel denies the remaining allegations. 33. In response to paragraph 33, Lexcel admits that, in or about June 2001, Carl Kubitz visited Merchant Transaction Systems, Inc. ("MTSI") in California. Lexcel denies the remaining allegations. 34. 35. Lexcel denies the allegations contained in paragraph 34. In response to paragraph 35, Lexcel admits that, on November 30, 2001, Lexcel, Inc. filed copyright applications for software entitled "Merchant" (TX5-462-976), "Authorization/TYSTEDIT.C/TSYEDIT.H" (TX5-462-978), "Card Production" (TX5-462-977), and "Authorization-Visa" (TX5-462-975). Lexcel also admits that, on December 5, 2001, Lexcel, Inc. filed a copyright application for its software entitled "Database Architecture" (TX5-509-439). Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 36. In response to paragraph 36, Lexcel lacks sufficient knowledge or information to

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form a belief as to the truth of the allegations and, on that basis, denies them. 37. 38. Lexcel denies the allegations contained in paragraph 37. In response to paragraph 38, Lexcel denies that it committed any fraud or misconduct and further denies that it caused any damage to Nelcela. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 39. In response to paragraph 39, Lexcel lacks knowledge or information sufficient to form a belief as to the truth of the allegations and, on that basis, denies them. 40. 41. 42. 43. Lexcel denies the allegations contained in paragraph 40. Lexcel denies the allegations contained in paragraph 41. Lexcel denies the allegations contained in paragraph 42. In response to paragraph 43, Lexcel admits it entered into a settlement agreement with MTSI and POST on January 20, 2006. Lexcel denies the remaining

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allegations regarding Lexcel, and Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 44. Lexcel denies the allegations regarding Lexcel contained in paragraph 44. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 45. 46. 47. 48. Lexcel denies the allegations contained in paragraph 45. Lexcel denies the allegations contained in paragraph 46. Lexcel denies the allegations contained in paragraph 47. Lexcel denies the allegations contained in paragraph 48.

COUNT ONE Fraud 49. In response to paragraph 49, Lexcel realleges its responses to paragraph 1 through

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48, above. 50. 51. Lexcel denies the allegations contained in paragraph 50. Lexcel denies the allegations regarding Lexcel contained in paragraph 51. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 52. Lexcel denies the allegations regarding Lexcel contained in paragraph 52. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 53. Lexcel denies the allegations regarding Lexcel contained in paragraph 53. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 54. 55. 56. 57. 58. 59. Lexcel denies the allegations contained in paragraph 54. Lexcel denies the allegations contained in paragraph 55. Lexcel denies the allegations contained in paragraph 56. Lexcel denies the allegations contained in paragraph 57. Lexcel denies the allegations contained in paragraph 58. Lexcel denies the allegations contained in paragraph 59.

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61. 62. 63. 64. 65. 60.

COUNT TWO Conversion In response to paragraph 60, Lexcel realleges its responses to paragraph 1 through 59, above. Lexcel denies the allegations contained in paragraph 61. Lexcel denies the allegations contained in paragraph 62. Lexcel denies the allegations contained in paragraph 63. Lexcel denies the allegations contained in paragraph 64. Lexcel denies the allegations contained in paragraph 65.

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66. 67. 68. 69. 70.

Lexcel denies the allegations contained in paragraph 66. Lexcel denies the allegations contained in paragraph 67. Lexcel denies the allegations contained in paragraph 68. Lexcel denies the allegations contained in paragraph 69. Lexcel denies the allegations contained in paragraph 70.

COUNT THREE Aiding and Abetting Tortious Conduct 71. In response to paragraph 71, Lexcel realleges its responses to paragraph 1 through 70, above. 72. Lexcel denies the allegations regarding Lexcel contained in paragraph 72. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them. 73. 74. 75. 76. 77. 78. 79. Lexcel denies the allegations contained in paragraph 73. Lexcel denies the allegations contained in paragraph 74. Lexcel denies the allegations contained in paragraph 75. Lexcel denies the allegations contained in paragraph 76. Lexcel denies the allegations contained in paragraph 77. Lexcel denies the allegations contained in paragraph 78. Lexcel denies the allegations contained in paragraph 79.

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COUNT FOUR Copyright Infringement 80. In response to paragraph 80, Lexcel realleges its responses to paragraph 1 through 79, above. 81. 82. Lexcel denies the allegations contained in paragraph 81. Lexcel denies the allegations contained in paragraph 82.

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83. 84. 85.

Lexcel denies the allegations contained in paragraph 83. Lexcel denies the allegations contained in paragraph 84. Lexcel denies the allegations regarding Lexcel contained in paragraph 85. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them.

86.

Lexcel denies the allegations regarding Lexcel contained in paragraph 86. Lexcel lacks sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, denies them.

87. 88. 89. 90.

Lexcel denies the allegations contained in paragraph 87. Lexcel denies the allegations contained in paragraph 88. Lexcel denies the allegations contained in paragraph 89. Lexcel denies the allegations contained in paragraph 90.

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COUNT FIVE Misappropriation 91. In response to paragraph 91, Lexcel realleges its responses to paragraph 1 through 90, above. 92. 93. Lexcel denies the allegations contained in paragraph 92. In response to paragraph 93, Lexcel lacks knowledge or information sufficient to form a belief as to the truth of the allegations and, on that basis, denies them. 94. 95. 96. /// /// /// Lexcel denies the allegations contained in paragraph 94. Lexcel denies the allegations contained in paragraph 95. Lexcel denies the allegations contained in paragraph 96.

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COUNT SIX Unfair Competition 97. In response to paragraph 97, Lexcel realleges its responses to paragraph 1 through 96, above. 98. 99. 100. 101. 102. 103. 104. 105. Lexcel denies the allegations contained in paragraph 98. Lexcel denies the allegations contained in paragraph 99. Lexcel denies the allegations contained in paragraph 100. Lexcel denies the allegations contained in paragraph 101. Lexcel denies the allegations contained in paragraph 102. Lexcel denies the allegations contained in paragraph 103. Lexcel denies the allegations contained in paragraph 104. Lexcel denies the allegations contained in paragraph 105.

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COUNT SEVEN Declaratory Relief 106. In response to paragraph 106, Lexcel realleges its responses to paragraph 1 through 105, above 107. 108. 109. 110. 111. Lexcel denies the allegations contained in paragraph 107. Lexcel denies the allegations contained in paragraph 108. Lexcel denies the allegations contained in paragraph 109. Lexcel denies the allegations contained in paragraph 110. Lexcel denies the allegations contained in paragraph 111.

112. /// /// ///

Lexcel denies each and every allegation not expressly admitted herein.

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AFFIRMATIVE DEFENSES 113. Neclela's Counterclaims fail, in whole or in part, to state a claim upon which relief may be granted. 114. Nelcela has failed to plead fraud with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. 115. Some or all of Nelcela's claims are barred by the doctrine of waiver, laches, illegality, estoppel, acquiescence, and unclean hands. 116. 117. Some or all of Nelcela's claims are barred by the applicable statute of limitations. Nelcela's counterclaims are without merit and subject to fees, costs, and/or damages pursuant to A.R.S. §12-349, et. seq. and 17 U.S.C. §505. 118. 119. Nelcela failed in whole or in part to mitigate its alleged damages. Nelcela's alleged damages, if any, were cause by the conduct of Nelcela or other people or entities unaffiliated with Lexcel. 120. Lexcel is not infringing, and has not infringed, is not willfully infringing, and has not willfully infringed any copyrights owned by Nelcela. 121. 122. Nelcela's copyright registrations are invalid, misused, and unenforceable. Lexcel alleges each and other every defense allowed under Rule 8 of the Federal Rules of Civil Procedure and/or Title 17 of the United States Code that are now or will later be supported by discovery in this matter.

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RESPECTFULLY SUBMITTED this 6th day of September, 2007. BRYAN CAVE LLP By s/ George C. Chen George C. Chen Two N. Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 Attorneys for Lexcel, Inc., Lexcel Solutions, Inc., Carl Kubitz, and Flora Kubitz

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CERTIFICATE OF SERVICE I hereby certify that on September 6, 2007, the foregoing Lexcel's Answer to Nelcela's Counterclaims was filed electronically. Notice of this filing will be sent to all parties by

operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

s/ Denise M. Aleman Denise M. Aleman

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588409

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