Free Motion in Limine - District Court of Arizona - Arizona

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Peter D. Baird (001978) [email protected] Robert H. McKirgan (011636) [email protected] Richard A. Halloran (013858) [email protected] Kimberly A. Demarchi (020428) [email protected] Lewis and Roca LLP 40 North Central Avenue Phoenix, Arizona 85004-4429 Facsimile (602) 734-3746 Telephone (602) 262-5311 Attorneys for POST Integrations, Inc., et al.
George C. Chen (019704) [email protected] Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, AZ 85004-4406 Tel: (602) 364-7367 Fax: (602) 364-7070 Attorneys for Lexcel, Inc. and Lexcel Solutions, Inc.

William McKinnon [email protected] 800 East Ocean Boulevard, Unit 501 Long Beach, California 90802-5449 Nicholas J. DiCarlo (016457) [email protected] DiCarlo Caserta & Phelps PLLC 6750 East Camelback Road, Suite 100-A Scottsdale, Arizona 85251 Attorneys for Plaintiff MTSI and Third Party Defendant Gene Clothier

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, MTSI AND POST PARTIES' MOTION IN LIMINE NO. 2: MOTION TO EXCLUDE EXHIBIT 5 (ALLEGED APRIL 1995 AGREEMENT BETWEEN ALEC DOLLARHIDE AND CCS LTD.) (Assigned to The Honorable Mary M. Murguia)

The Lexcel, MTSI and POST Parties move pursuant to Federal Rules of Evidence ("FRE") 1002 and 1003 for an order precluding the Nelcela Parties from admitting the document currently designated as Trial Exhibit 5, which purports to be an April 1995 agreement between Alec Dollarhide and Credit Card Services, Ltd. (A copy of Trial Exhibit 5 is attached as Exhibit 1.) I. The Document Is Admissible Pursuant to FRE 1003. FRE 1002 requires that the content of a writing be proved by the original of that writing. The Nelcela Parties have never produced the original of Exhibit 5, and denied
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possessing the original in response to the POST Parties' request to inspect that document. (See June 9, 2005 e-mail from Veronica Manolio, attached as Exhibit 2.) Duplicates of writings are only admissible as substitutes for the original writing if there is no genuine question raised regarding the authenticity of the original. FRE 1003. As this Court found in its ruling on the cross-motions for summary judgment, the Lexcel, MTSI and POST parties have raised such a genuine question via the expert report of William Flynn, a questioned documents examiner. (Sept. 30, 2006 Order at 10, docket no. 383.) Mr. Flynn has examined the copy of Exhibit 5 produced in this litigation and has determined, based on the alignment of the text, that the second paragraph of the alleged agreement was added on via a second pass through the printer, after the first paragraph and signature blocks were printed on the document. (See Report of William Flynn, attached as Exhibit 3.) Mr. Flynn's analysis is illustrated by a copy of the document with ruled lines superimposed on the text; this copy clearly demonstrates the alteration of the document even to the non-expert eye. The Nelcela Parties have offered no rebuttal to Mr. Flynn's analysis, and his analysis is more than sufficient to meet the Rule 1003 standard of "a genuine question" regarding the copy's authenticity. Pursuant to FRE 1003, Exhibit 5 is inadmissible. II. The Document Is Also Inadmissible Pursuant to FRE 402 and 403. Exhibit 5 is also inadmissible because it is irrelevant and is likely to confuse and mislead the jury. See FRE 402 and 403. In this Court's ruling on motions for summary judgment, the Court held: Based upon the undisputed similarities between the Lexcel 2001 software, MTSI software and Nelcela software the Court finds that as a matter of law that they are substantially similar beyond the possibility of random chance and that copying took place. September 30, 2006 Order on Motions for Summary Judgment, p. 28, ll. 14-16. The Court also found: The joint parties [Lexcel, MTSI and POST] argue that there can be no other reasonable conclusion other than that Lexcel, Inc., owns the software based upon the relationship between Lexcel's 94/95 software and 2001 software. However, the Court finds that presently to be an issue of fact as to this
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relationship. At trial, if it is determined that the Lexcel 2001 software is substantially similar, derivative of or is an update of Lexcel's 94/95 software than it appears that a conclusion can be made that Lexcel, Inc. is the owner of the software as its software predates any other version. Conversely, however, if it is determined that Lexcel's 94/95 software is distinct from the Lexcel 2001 software, then the determination of ownership will likely boil down to the determination of whose software was created first. Id., pp. 28-29. Thus, the two issues the Court framed for trial are: (1) whether Lexcel's 2001 software is the same or a derivative of Lexcel's 94/95 software; and (2) if not, then whose software -- Lexcel's or Nelcela's -- came first. The April 1995 agreement has no relevance or bearing on these issues. First, Mr. Dollarhide/Nelcela cannot use the April 1995 agreement to argue that Mr. Dollarhide owns any of the Lexcel software as Charlie Anderson/CCS agreed -- in the original license/use agreement between Lexcel and CCS and then again in a subsequent settlement agreement -- that Lexcel is the owner of the software. Second, Mr. Anderson testified that the April 1995 agreement relates to software that he believed Mr. Dollarhide was creating "independently" of the Lexcel software. On June 30, 1994, Lexcel and Credit Card Services, Ltd. (Charlie Anderson's company) entered into a license/use agreement that recited: Whereas, Lexcel, Inc. is the owner and holder of certain rights in and to that certain personal computer switching device and credit card specific software known as the CCS system, which includes licensor's trademark "pc switch," sometimes referred to as the authorization system, and is further comprised of the cardholder system and the merchant system, all as more particularly described and to be known as the CCS system . . . ." (See Exhibit 4.) The agreement also went on to provide that "Licensor [Lexcel] shall at all times own said system." Id. at p. 6, Sec. VIII. This agreement predated the April 1995 agreement. Accordingly, in April 1995 Mr. Anderson and CCS had no ownership interest in the Lexcel software, and thus could not grant any ownership interest in the Lexcel software to Mr. Dollarhide.

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Mr. Anderson and CCS reaffirmed Lexcel's ownership interest in a July 1, 1995 settlement agreement. That agreement resolved litigation between Lexcel and CCS. That agreement provided a license to CCS to use Lexcel's software but the agreement made clear that the software and all derivative works "shall remain the property of Licensor [Lexcel]." (Exhibit 5 at p. 2, ¶ 4.) Mr. Anderson confirmed the meaning of the settlement in his deposition. (Deposition of Charles Anderson, Exhibit 6, at p. 215 ln.23 - p. 217 ln.13.) Between the time of the original Lexcel/CCS license/use agreement and the Lexcel/CCS settlement agreement, Mr. Dollarhide and Mr. Anderson purportedly executed the April 1995 agreement. Mr. Anderson's testimony and affidavit make clear that the agreement related to "new" software to be developed by Alec Dollarhide independently and without the use of the Lexcel source code. (Deposition of Alec Dollarhide, Exhibit 7, at pp. 51-52; Affidavit of Charles Anderson, Exhibit 8, at ¶¶ 14-16.) Accordingly, the April 1995 agreement has nothing to do with ownership of the Lexcel source code or which source code came first in time. Allowing this agreement into evidence will only confuse the jury. RESPECTFULLY SUBMITTED January 19, 2007. BRYAN CAVE LLP By s/ George C. Chen George C. Chen Attorneys for Lexcel, Inc. and Lexcel Solutions, Inc. DICARLO CASERTA & PHELPS PLLC Nicholas J. DiCarlo and LAW OFFICES OF WILLIAM McKINNON By s/ William McKinnon William McKinnon Attorneys for Merchant Transaction Systems, Inc., Gene Clothier, and Tone Clothier
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LEWIS AND ROCA LLP By s/ Richard A. Halloran Peter D. Baird Robert H. McKirgan Richard A. Halloran Kimberly A. Demarchi Attorneys for POST Integrations, Inc., Ebocom, Inc., Mary L. Gerdts, and Douglas McKinney

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CERTIFICATE OF SERVICE I hereby certify that on January 19, 2007, I electronically transmitted the attached document 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: Merrick B. Firestone [email protected] Veronica L. Manolio [email protected] RONAN & FIRESTONE, PLC 9300 East Raintree Drive, Suite 120 Scottsdale, Arizona 85260 Attorneys for Defendants Nelcela Incorporated, Alec Dollarhide, and Len Campagna

s/ Debi Garrett

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