Free Answer to Third Party Complaint - 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 CARL KUBITZ AND FLORA KUBITZ'S ANSWER TO NELCELA, INC., LEN CAMPAGNA, AND ALEC DOLLARHIDE'S THIRD-PARTY COMPLAINT (Jury Trial Demanded)

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Carl Kubitz and Flora Kubitz (collectively, the "Kubitzes") answer Nelcela, Inc., Len Campagna, and Alec Dollarhide's (collectively, "Nelcela") third-party complaint against the Kubitzes, as follows: 1. In response to paragraph 1, upon information and belief, the Kubitzes admit that Nelcela, Inc. is an Arizona Corporation with a place of business in Scottsdale, Arizona. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 2. 3. 4. The Kubitzes admit the allegations contained in paragraph 2. The Kubitzes admit the allegations contained in paragraph 3. In response to paragraph 4, the Kubitzes admit that the Court has allowed Lexcel Inc. and Lexcel Solutions, Inc. (collectively, "Lexcel") to enter this lawsuit as intervenor plaintiffs. The Kubitzes deny that Lexcel, Inc. is the only proper party to this suit. The Kubitzes lack sufficient knowledge or information to form a

Case 2:02-cv-01954-MHM

Document 556

Filed 09/06/2007

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

belief as to the truth of the remaining allegations and, on that basis, deny them. 5. In response to paragraph 5, the Kubitzes admit that they are married, reside in Maricopa County, Arizona, are officers of Lexcel, Inc., are officers of Lexcel Solutions, Inc., and acted on behalf of their marital community. The Kubitzes deny the remaining allegations. 6. In response to paragraph 6, the allegations are conclusions of law for which no response is required, but to the extent the Kubitzes are required to respond, the Kubitzes deny such allegations. 7. In response to paragraph 7, to the extent the allegations are not conclusions of law such that a response is required, the Kubitzes deny the allegations. 8. In response to paragraph 8, the Kubitzes reallege its responses to Paragraphs 1 through 7, above, and paragraphs 9 through 122, below. The Kubitzes are not required to respond to Nelcela's other pending Counterclaims and Third Party Complaint(s) on file in this Litigation, but to the extent the Kubitzes were required to respond and/or did respond, the Kubitzes hereby incorporate their responses. 9. In response to paragraph 9, the Kubitzes admit that this court has jurisdiction over this matter and that this court is the proper forum for Nelcela's present third-party claims against the Kubitzes. 10. In response to paragraph 10, the Kubitzes admit Alec Dollarhide ("Dollarhide") is a computer programmer. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 11. In response to paragraph 11, upon information and belief, the Kubitzes admit Dollarhide was hired by Credit Card Services, Ltd. ("CCS Ltd.") as a computer programmer. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 12. In response to paragraph 12, the Kubitzes admit CCS Ltd. initially contracted

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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. The Kubitzes deny the remaining allegations, if any. 13. In response to paragraph 13, the Kubitzes admit that Carl Kubitz is the president of Lexcel, Inc. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 14. In response to paragraph 14, the Kubitzes admit that Dollarhide worked in Lexcel, Inc.'s office and that Carl Kubitz and Dollarhide worked on software licensed to CCS Ltd. by Lexcel, Inc. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 15. In response to paragraph 15, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 16. In response to paragraph 16, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 17. In response to paragraph 17, the Kubitzes admit 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. The Kubitzes deny the remaining allegations, if any. 18. In response to paragraph 18, the Kubitzes admit 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, Inc. had any claims against Nelcela, Inc., Len Campagna, or

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Alec Dollarhide at that time, the Kubitzes admit that the settlement did not settle any such claims. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 19. In response paragraph 19, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 20. In response to paragraph 20, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 21. In response to paragraph 21, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 22. In response to paragraph 22, the Kubitzes deny 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. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 23. In response to paragraph 23, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 24. In response to paragraph 24, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 25. In response to paragraph 25, the Kubitzes admit Carl Kubitz met with Dollarhide and Len Campagna ("Campagna") in May 1999. remaining allegations. 26. In response to paragraph 26, the Kubitzes admit that Carl Kubitz met with The Kubitzes deny the

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Dollarhide and Campagna in May 1999. allegations. 27. 28.

The Kubitzes deny the remaining

The Kubitzes deny the allegations contained in paragraph 27. In response to paragraph 28, the Kubitzes admit that the Lexcel, Inc. software has processed credit card transactions, and that Lexcel, Inc. created software for the processing of merchants' credit card transactions. remaining allegations, if any. The Kubitzes deny the

29.

In response to paragraph 29, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them.

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30.

In response to paragraph 30, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them.

31.

In response to paragraph 31, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them.

32.

In response to paragraph 32, the Kubitzes admit that, in or about April 2001, Mary Gerdts met with Carl Kubitz. The Kubitzes deny the remaining allegations.

33.

In response to paragraph 33, the Kubitzes admit that, in or about June 2001, Carl Kubitz visited Merchant Transaction Systems, Inc. ("MTSI") in California. The Kubitzes deny the remaining allegations.

34. 35.

The Kubitzes deny the allegations contained in paragraph 34. In response to paragraph 35, the Kubitzes admit that, on November 30, 2001, Lexcel, Inc. filed copyright applications for software entitled "Merchant" (TX5462-976), "Authorization/TYSTEDIT.C/TSYEDIT.H" (TX5-462-978), "Card Production" (TX5-462-977), and "Authorization-Visa" (TX5-462-975). The

Kubitzes also admit that, on December 5, 2001, Lexcel, Inc. filed a copyright

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application for its software entitled "Database Architecture" (TX5-509-439). The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 36. In response to paragraph 36, the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the allegations and, on that basis, deny them. 37. 38. The Kubitzes deny the allegations contained in paragraph 37. In response to paragraph 38, the Kubitzes deny that either of them committed any fraud or misconduct and further deny that it caused any damage to Nelcela. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 39. In response to paragraph 39, the Kubitzes lack knowledge or information sufficient to form a belief as to the truth of the allegations and, on that basis, deny them. 40. 41. 42. 43. The Kubitzes deny the allegations contained in paragraph 40. The Kubitzes deny the allegations contained in paragraph 41. The Kubitzes deny the allegations contained in paragraph 42. In response to paragraph 43, the Kubitzes admit Lexcel entered into a settlement agreement with MTSI and POST on January 20, 2006. The Kubitzes deny the remaining allegations regarding the Kubitzes, and the Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 44. The Kubitzes deny the allegations regarding the Kubitzes contained in paragraph 44. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them. 45. 46. The Kubitzes deny the allegations contained in paragraph 45. The Kubitzes deny the allegations contained in paragraph 46.

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47. 48.

The Kubitzes deny the allegations contained in paragraph 47. The Kubitzes deny the allegations contained in paragraph 48.

COUNT ONE Fraud 49. In response to paragraph 49, the Kubitzes reallege its responses to paragraph 1 through 48, above. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. The Kubitzes deny the allegations contained in paragraph 50. The Kubitzes deny the allegations contained in paragraph 51. The Kubitzes deny the allegations contained in paragraph 52. The Kubitzes deny the allegations contained in paragraph 53. The Kubitzes deny the allegations contained in paragraph 54. The Kubitzes deny the allegations contained in paragraph 55. The Kubitzes deny the allegations contained in paragraph 56. The Kubitzes deny the allegations contained in paragraph 57. The Kubitzes deny the allegations contained in paragraph 58. The Kubitzes deny the allegations contained in paragraph 59.

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COUNT TWO Conversion 60. In response to paragraph 60, the Kubitzes reallege its responses to paragraph 1 through 59, above. 61. 62. 63. 64. 65. The Kubitzes deny the allegations contained in paragraph 61. The Kubitzes deny the allegations contained in paragraph 62. The Kubitzes deny the allegations contained in paragraph 63. The Kubitzes deny the allegations contained in paragraph 64. The Kubitzes deny the allegations contained in paragraph 65.

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66. 67. 68. 69. 70.

The Kubitzes deny the allegations contained in paragraph 66. The Kubitzes deny the allegations contained in paragraph 67. The Kubitzes deny the allegations contained in paragraph 68. The Kubitzes deny the allegations contained in paragraph 69. The Kubitzes deny the allegations contained in paragraph 70.

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

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COUNT FOUR Copyright Infringement 80. In response to paragraph 80, the Kubitzes reallege its responses to paragraph 1 through 79, above. 81. 82. The Kubitzes deny the allegations contained in paragraph 81. The Kubitzes deny the allegations contained in paragraph 82.

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83. 84. 85.

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

86.

The Kubitzes deny the allegations regarding the Kubitzes contained in paragraph 86. The Kubitzes lack sufficient knowledge or information to form a belief as to the truth of the remaining allegations and, on that basis, deny them.

87. 88. 89. 90.

The Kubitzes deny the allegations contained in paragraph 87. The Kubitzes deny the allegations contained in paragraph 88. The Kubitzes deny the allegations contained in paragraph 89. The Kubitzes deny the allegations contained in paragraph 90.

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

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

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COUNT SEVEN Declaratory Relief 106. In response to paragraph 106, the Kubitzes reallege its responses to paragraph 1 through 105, above 107. 108. 109. 110. 111. The Kubitzes deny the allegations contained in paragraph 107. The Kubitzes deny the allegations contained in paragraph 108. The Kubitzes deny the allegations contained in paragraph 109. The Kubitzes deny the allegations contained in paragraph 110. The Kubitzes deny the allegations contained in paragraph 111.

112. /// /// ///

Kubitzes deny each and every allegation not expressly admitted herein.

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AFFIRMATIVE DEFENSES 113. Nelcela's third-party complaint fails, 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 third-party claims 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 the Kubitzes. 120. Kubitzes are not infringing, and have not infringed, are not willfully infringing, and have not willfully infringed any copyrights owned by Nelcela. 121. 122. Nelcela's copyright registrations are invalid, misused, and unenforceable. Kubitzes allege 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 Kubitzes' Answer to Nelcela's third-party complaint 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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588623

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