Free Motion in Limine - District Court of Arizona - Arizona

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LAW OFFICES

RONAN & FIRESTONE, PLC
9300 E. RAINTREE DRIVE, SUITE 120 SCOTTSDALE, ARIZONA 85260 (480) 222-9100

Merrick B. Firestone, SB #012138 Veronica L. Manolio, SB #020230 Attorneys for the Nelcela Defendants

UNITED STATES DISTRICT COURT IN AND FOR THE DISTRICT OF ARIZONA Merchant Transaction Systems, Inc., Plaintiff, vs. Nelcela, Inc., an Arizona corporation; Ebocom, Inc., a Delaware Corporation; POST Integrations, Inc., an Illinois Corp., et. al. Defendants. And Related Counterclaims, Cross-Claims and Third-Party Complaint. I. INTRODUCTION Because the joint parties have attempted to confuse the software programs at issue in this case, have lumped software programs together and collectively call them "software," and just genuinely attempt to mislead the Court and the jury about what code is really at issue, Nelcela, Inc., Len Campagna and Alec Dollarhide (collectively "Nelcela") respectfully ask the Court to enter an Order in limine to preclude any documents, testimony, evidence, exhibits, or other references (collectively "references") regarding Authorization Systems. The only software that has ever been at issue at any phase of this litigation is a "back-office," Merchant System. Lexcel never had a merchant system, and its 1994/1995 disks of code prove that. So, once this Court limited the ownership trial to a "first in time" issue, the joint parties began urging that the Authorization System ­ the only system where any similarities may occur between Nelcela and Lexcel ­ is at issue. Only the Merchant System should be litigated, and this Court should now No. 02-CV-1954 - PHX-MHM NELCELA, INC., LEN CAMPAGNA AND ALEC DOLLARHIDE'S MOTION IN LIMINE NO. 2 TO EXCLUDE EXPERT ANALYSIS OF "AUTHORIZATION" SYSTEMS (Oral Argument Requested) (The Honorable Mary H. Murguia)

Case 2:02-cv-01954-MHM

Document 423

Filed 01/19/2007

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exclude the joint parties from any references to copying, similarity, or other findings related to any Authorization System.

II.

BRIEF FACTUAL BACKGROUND A. Only a "Back-Office," Merchant System Has Ever Been At Issue Here.

As the Court will likely remember, when MTSI filed this lawsuit, its counsel had no idea what software was at issue. After years of litigation, MTSI still would not identify for Nelcela (or for the Court) what the name of the code was that was at issue. See, e.g., Hearing Transcript from status hearing dated March 31, 2005 attached here as Exhibit A and incorporated by this reference. Nelcela asked the pointed questions: What "software" are we fighting about? What is it that MTSI claims it owns? Id. at pp. 10-12. The Court then asked the pointed question to MTSI's counsel, "What software is at issue?" Id. at p. 14. Mr. Steimel, MTSI's counsel, affirmed that it is the Nelcela Merchant Suites source code at issue in this litigation.1 Id. at p. 13, line 8 - p. 14, line 23. MTSI went on to avow to the Court that only the Merchant System was at issue. Id. at pp. 17. This Court was gracious enough to let MTSI proceed with this case, reminding MTSI that both MTSI and Post sued without even knowing what the subject was of software they were suing. Id.; see also, pp. 18-19. Nonetheless, the Court accepted MTSI's avowals that a Merchant System was at issue in this litigation. Id. all. Post confirms that the software at issue here is a, "back office," Merchant System. See, e.g., Post's Cross-claim against Nelcela at p. 21, ¶¶20-22 (Post only attempted to purchase a "back-office" merchant system. No authorization system was ever contemplated by Post, and there was no contract for any authorization system.) Post never requested an Authorization System, but extensively explains to this Court that it wanted a Merchant System to, "process credit card transactions for merchants." Id. at pp. 17-21 (Post requested the "Nelcela Merchant System.") Nelcela refers to its own Merchant System as the "Merchant Suites," but that is a Nelcela-created terminology for its own system. The Nelcela Merchant System, copyrighted on May 18, 1999 is the "Merchant System" at issue in this litigation.
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When Lexcel was permitted to intervene in this action, this Court was very clear with Lexcel that it would be permitted to intervene on the express understanding that the issues were not expanded and that Lexcel may have an interest in the software that was already at issue in this litigation. See, Court's Order dated July 28, 2005 (Docket #209) at page 4. The Court was clear that Lexcel would comply with the "expedited track" of discovery, the already-established deadlines, and the remaining discovery time-table. Id. at pp. 4-5. This Court did not allow Lexcel to expand these proceedings to include additional copyrights or additional software that had not been previously at issue in this case. Id.

B.

No Expert has Found Any Matching in the Merchant Systems.

Nelcela does not intend to re-hash its motion(s) for summary judgment by arguing that no software is "matched." However, it is essential that this Court know none of the joint parties' experts offered any matching in Merchant Systems. See, e.g., Nelcela's Response to the Joint Parties' Motion to Appoint Technical Advisor (Docket #394) incorporated here by this reference. Even though Nelcela wrote and copyrighted several pieces of source code, none of those various codes are at issue now. Id. (Docket #394), citing to Exhibit A at p. 40. (Nelcela developed an authorization source code, a terminal driver source code, and a credit card acquiring source code among others. The only code that has ever been at issue in this litigation is the merchant code which Nelcela calls its, "Merchant Suites.") Each of the joint parties has confirmed, in pleadings and avowals to the Court, that only the Merchant System is in dispute. Id., citing to MTSI's First Amended Complaint on file with this Court at ¶¶4, 19 (Nelcela was only accused of using MTSI's "back office software for merchant credit card processing services," a merchant system.); Post's Cross-claim against Nelcela at p. 21, ¶¶20-22 (Post only attempted to purchase a "back-office" merchant system.); Lexcel's First Amended Complaint on file with this Court at ¶¶10-15. Each of the respective experts in this case should have been comparing the parties' merchant codes to one another as the merchant codes were the only ones at issue. Id. all.

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III.

LAW AND ARGUMENT The joint parties seek to expand the issues to include an Authorization System because the

evidence proves that Lexcel never had a Merchant System in 1994/1995, and its "first in time" argument will be lost. See, Affidavit of Jeffrey M. Pell attached here as Exhibit B and incorporated by this reference at ¶¶6-8. Mr. Pell examined the original 1994/1995 Lexcel floppy disks to find: 1) the disks contain a fragmented set of code, none of which is a Merchant System; 2) no data was removed from those original disks; and 3) anything done by Lexcel in these 1994/1995 disks related to an Authorization System, not a Merchant System. For the jury to now hear that there is "similarity" between the 1994/1995 Lexcel floppy disks and the Nelcela Merchant System would not only be factually incorrect, but it would produce a prejudicial result unsupported by evidence. Rule 403 of the FEDERAL RULES OF EVIDENCE ("FRE") authorizes excluding evidence - even if relevant - when, "its probative value is substantially outweighed by the danger of unfair prejudice, ... or misleading the jury...." While this Court has broad discretion under Rule 403 FRE, that discretion is not unlimited, and this court should always exclude evidence that will create a prejudicial effect. See, United States v. Hitt, 981 F.2d 422, 424 (9th Cir. 1992). (Holding that when the probative value of evidence is outweighed by a prejudicial effect, evidence should be excluded.) Likewise, the Hitt Court determined that when evidence has slight (if any) probative value but only a, "modest likelihood of unfair prejudice or a small risk of misleading the jury," that evidence must be withheld or will be deemed an abuse of discretion by the trial court. Id. This instance is the precise dilemma both Hitt and Rule 403 aim to rectify. MTSI brought its claims for ownership of a Merchant System. See generally, Exhibit A, supra. Post agreed that only a Merchant System was at issue. See, Docket #394, incorporated here. Lexcel intervened late in this game, litigating ownership of the Nelcela Merchant System copyrighted back in 1999. Id. If this Court allows the jury to hear any references to similarities, copying, or commonalities of an Authorization System, not even at issue, Nelcela will be greatly prejudiced. See, Hitt, supra, 981 F.2d at 424. The jury may be convinced that similarities in any two systems ­ even systems not in

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dispute here ­ means that copying occurred in the Nelcela Merchant System. Id. That question is not at issue, and it would be an abuse of discretion to allow the joint parties a "dog and pony" show of material not at dispute in this matter. Id. at p. 424 (Allowing prejudicial evidence that is even "modestly" prejudicial is an abuse of discretion.); see also, State v. Berger, 108 Ariz. 396, 499 P.2d 152 (1972)(Motions in limine should be used to avoid disclosing prejudicial matters to the jury.); see also, State v. Hensley, 142 Ariz. 598, 691 P.2d 689 (1984) (Evidence should be excluded from the jury there is a danger that it will prejudice a party or confuse the issues.)

IV.

CONCLUSION There is absolutely no doubt that evidence of similarity in the copyrighted Nelcela

Authorization System and the Lexcel Authorization System will confuse the jury about whether similarity exists in the Merchant System(s). There is also no doubt that the jury confusion is likely to prejudice Nelcela irreparably. For all the reasons cited herein, Nelcela respectfully asks this Court to exclude any references (documents, testimony, evidence, exhibits, or other references) of the Authorization System(s) not at dispute. Nelcela asks this Court for an Order that the software at issue is only the copyrighted Nelcela Merchant System and evidence on the Authorization Systems will be excluded entirely. RESPECTFULLY SUBMITTED this 19th day of January, 2007. RONAN & FIRESTONE, PLC

20 21 22 23 24 25 26 /// /// /s/ Veronica L. Manolio Merrick B. Firestone Veronica L. Manolio 9300 E. Raintree Drive, Suite 120 Scottsdale, Arizona 85260 Attorneys for Nelcela, Inc., Leonard Campagna and Alec Dollarhide

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ORIGINAL filed electronically with the Clerk's Office and COPIES electronically transmitted to the following CM/ECF registrants this same date to: Nicholas J. DiCarlo [email protected] Local Counsel for Merchant Transaction Systems William McKinnon [email protected] Attorney for Merchant Transaction Systems George C. Chen [email protected] or [email protected] Attorneys for Lexcel, Inc. and Lexcel Solutions, Inc. Peter D. Baird [email protected] Robert H. McKirgan [email protected] Richard A. Halloran [email protected] Kimberly Demarchi [email protected] Attorneys for POST, Ebocom, Mary Gerdts, and Douglas McKinney

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/s/ Diana Renteria

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