Free Reply in Support of Motion - 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 ) ) Plaintiff, ) vs. ) ) Nelcela, Inc., et al., ) Defendants. ) ) ) And Related Counterclaims, Cross-Claims, ) and Third-Party Claims. ) ) Introduction Nowhere in their Response to Lexcel's Motion for Possession of Trial Exhibit 675 do Nelcela, Inc., Len Campagna, and Alec Dollarhide (collectively "Nelcela") make any reasonable argument suggesting that Trial Exhibit 675 should be returned to Nelcela. The facts established at trial prove that Nelcela is not entitled to Trial Exhibit 675. Either Lexcel, Inc. ("Lexcel") or Merchant Transaction Systems, Inc. ("MTSI") are rightfully entitled to take possession of Trial Exhibit 675. In addition, the Court may retain possession of Trial Exhibit 675. No basis exists, however, to return Trial Exhibit 675 to Nelcela. Argument Trial Exhibit 675 constitutes three floppy disks that contain part of Lexcel's source code. As stated in the Lexcel Parties' Motion (at 1-2), the evidence at the jury trial for Phase I including (a) the 1995 Settlement Agreement between Lexcel and Credit Card Merchant Transaction Systems, Inc., No. CIV 02-1954-PHX-MHM THE LEXCEL PARTIES' REPLY IN SUPPORT OF THEIR MOTION FOR POSSESSION OF TRIAL EXHIBIT 675

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578915/0201990

Case 2:02-cv-01954-MHM

Document 515

Filed 05/18/2007

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

Services, Ltd. ("CCS"), admitted as Trial Exhibit 3, and (b) the trial testimony regarding that agreement established that Lexcel owned the source code that Carl Kubitz saved onto floppy disks in 1995. Additionally, Carl Kubitz testified at the trial that he gave those floppy disks to Alec Dollarhide in 1995 and that Mr. Dollarhide was to act as a messenger and deliver the floppy disks to CCS pursuant to the 1995 Settlement Agreement. Mr. Dollarhide's role in this transaction did not provide either Mr.

Dollarhide or Nelcela any ownership rights or entitlement to Trial Exhibit 675. Nothing in Nelcela's Response maintains otherwise. Instead, Nelcela argues (at 2) that it owns the actual floppy disks that constitute Trial Exhibit 675. Nelcela then tries (at 2) to distinguish between the floppy disks and the source code contained on those floppy disks. This argument has no merit. Even Nelcela admits (at 2) that the jury determined that Lexcel owns the source code contained on the floppy disks. As such, Nelcela has no right to the source code regardless of the source code's physical location. Furthermore, as stated above, Mr. Dollarhide received the floppy disks as part of a transaction to which he was only the messenger. Even if Nelcela's argument had any validity, Nelcela has no ownership right in the physical floppy disks. Finally, under the 1995 Settlement Agreement between CCS and Lexcel, admitted as Trial Exhibit 3, CCS was not permitted to give the source code to any party. Therefore, contrary to Nelcela's contention (at 2), Mr. Anderson was not permitted to give the floppy disks at issue to Mr. Dollarhide. Lexcel is the rightful owner of the source code and, as stated in the Lexcel Parties' Motion, is entitled to possession of Trial Exhibit 675. The only other party that could claim a right to possession of the floppy disks is MTSI, as the successor in interest to CCS. CCS was the original owner of Trial Exhibit 675 and was entitled under the aforementioned settlement agreement to keep, though not distribute, the source code. Undersigned counsel has discussed this issue with counsel for MTSI, and has been informed that MTSI does not object to Lexcel's possession of the floppy disks.

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

Finally, Nelcela argues (at 2) that its expert, Kevin Faulkner, testified that the floppy disks do not contain everything that Lexcel claimed was on the floppy disks. This argument does not change the fact that the floppy disks contain source code that belongs to Lexcel. Importantly, Mr. Faulkner also testified that at least one of the floppy disks was accessed in October 2002, an opinion that is confirmed by the forensic software report marked as Trial Exhibit 623, a copy of which is attached as Exhibit 1 to the accompanying Declaration of Counsel. Though at trial Mr. Dollarhide testified that he never accessed the floppy disks, Nelcela was the only entity in possession of the floppy disks in October 2002. Conclusion Either Lexcel or MTSI are entitled to take possession of Trial Exhibit 675. In the alternative, the Court could retain possession of Trial Exhibit 675 pending the completion of this litigation. Nelcela, however, has no right to possess or use the Lexcel code contained on Trial Exhibit 675 and should not take possession of the floppy disks.

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RESPECTFULLY SUBMITTED this 18th day of May, 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 May 18, 2007, The Lexcel Parties' Reply in Support of Their Motion for Possession of Trial Exhibit 675 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/Melinda Erway Melinda Erway

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