Free Motion to Dismiss Counts/Claims - 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. ) ) Merchant Transaction Systems, Inc., No. CIV 02-1954-PHX-MHM CARL KUBITZ AND FLORA KUBITZ'S MOTION TO DISMISS NELCELA, INC., LEN CAMPAGNA, AND ALEC DOLLARHIDE'S THIRD-PARTY COMPLAINT

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Pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure, Carl Kubitz and Flora Kubitz (the "Kubitzes") move to dismiss Nelcela, Inc., Alec Dollarhide, and Leonard Campagna's (collectively, "Nelcela's") Third-Party Complaint against them because all of Nelcela's seven claims are barred by the applicable statutes of limitation and also because Nelcela's Third Party Complaint fails to plead allegations of fraud with particularity. This Motion is supported by the following Memorandum of Points and Authorities and is also supported by the reasons stated in Lexcel, POST, and MTSI's Motion to Strike Nelcela's Affirmative Defenses, Counterclaims, and Third-Party Complaint (Dckt No. 410). /// /// ///

566300/0201990

Case 2:02-cv-01954-MHM

Document 416

Filed 12/26/2006

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MEMORANDUM OF POINTS AND AUTHORITIES I. NELCELA'S THIRD-PARTY COMPLAINT IS UNTIMELY AND SHOULD BE DISMISSED PURSUANT TO FED. R. CIV. P. 12(b)(6). In November 2002, Carl Kubitz and Flora "Pete" Kubitz executed declarations stating, among other things, that: (a) Lexcel Solutions, Inc. ("Lexcel") created and copyrighted the Lexcel source code; (b) Lexcel owned the Lexcel software, including the source code; and (c) Nelcela improperly obtained and used the Lexcel software. See Chen Decl., Exh. 1, Declaration of Carl Kubitz at ¶¶ 16-22; Chen Decl., Exh. 2, Declaration of Pete Kubitz at ¶¶ 14-22. The Kubitzes' declarations also describe their 2001 meetings with Mary Gerdts of POST Integrations, Inc. (collectively, "POST") and MTSI. See Chen Decl, Exh. 1, Declaration of Carl Kubitz at ¶¶ 22-24; Chen Decl., Exh. 2, Declaration of Pete Kubitz at ¶¶ 19-21. On November 17, 2006, Nelcela filed its Third-Party Complaint (Dckt. No. 399) against Carl Kubitz and Flora "Pete" Kubitz alleging, in summary, as follows: · Post, Lexcel and MTSI met at various times in 2001 and concocted a scheme to defraud Nelcela. [Nelcela's Third-Party Complaint (Dckt. No. 399) at ¶¶ 31-34]. · Lexcel allegedly improperly obtained copies of Nelcela software from POST, improperly represented that it owned Nelcela's software, and fraudulently licensed it to others, including POST and MTSI. [Id. at ¶¶ 62-64]. · Lexcel allegedly infringed Nelcela's copyrights by using and licensing the Lexcel software to POST and MTSI. [Id. at ¶¶ 81-89]. · Lexcel allegedly supplied false information to the United States Patent and Trademark Office1 when applying for copyright registrations in 2001 for the Lexcel software. [Id. at ¶¶ 35-37, 52].

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The Complaint's allegations actually state these misrepresentations were made to the United States Patent and Trademark Office, however, copyright applications are submitted to the United States Copyright Office. 2
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· Carl Kubitz and Flora "Pete" Kubitz allegedly submitted false affidavits to this Court in 2001 in an effort to further the alleged scheme. [Id. at ¶ 45]. · Nelcela has been harmed by the fraud, copyright infringement, and frivolous litigation that has ensued since 2001. [Id. at ¶ 47]. · Nelcela was forced to shut its doors and ceased operating in May 2001 as a result of the alleged scheme to defraud Nelcela. [Id. at ¶¶ 38-39]. Nelcela's claims for conversion, aiding and abetting tortious conduct, and unfair competition are governed by a two-year statute of limitations period. See A.R.S. § 12542. Nelcela's claims for fraud, misappropriation, and copyright infringement are governed by a three-year statute of limitations period. See A.R.S. §§ 12-543 and 44-406; 17 U.S.C. 507(b). The purpose behind the statute of limitations is to prevent the enforcement of stale claims by setting a time limit within which an action must be brought. E.g., Hall v. Romero, 141 Ariz. 120, 126, 685 P.2d 757, 763 (Ct. App. 1984) (affirming summary judgment in favor of the accused wrongdoer because the statute of limitations had run). A statute of limitations period begins to run when the plaintiff knows, or by the exercise of reasonable diligence should have known, of the defendant's conduct giving rise to the suit. Angus Med. Co. v. Digital Equip. Corp., 173 Ariz. 159, 162, 840 P.2d 1024, 1027 (Ct. App. 1992). On January 3, 2003, the declarations of Carl Kubitz and Pete Kubitz were served on the Nelcela parties. [POST Response to Motion to Dismiss Complaint (Dckt. No. 26) at 2, n. 2.] Accordingly, at least by January 3, 2003,2 Nelcela knew that: (a) Lexcel had copyrighted its source code; (b) Lexcel claimed ownership of its source code; (c) Lexcel maintained Nelcela had stolen its source code; (d) Lexcel discussed these issues with MTSI and POST; and (e) Lexcel provided MTSI and Post with the declarations. In fact,
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Although parties to this litigation submitted the Kubitzes' declarations to this Court in January 2003, Nelcela admits knowing of the facts stated in the declarations at least as early as 2001, more than five (5) years ago. See Nelcela Third-Party Complaint against the Kubitzes (Dckt. No. 399) at ¶ 45. 3
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Nelcela's Third-Party Complaint alleges, on its face, that the Kubitzes' actions harmed Nelcela so much that Nelcela, Inc. was forced to shut its doors and cease operations in 2001. [Nelcela's Third-Party Complaint (Dckt. No. 399) at ¶¶ 38-39] Simply put, at the very latest, Nelcela knew of all the claims it now alleges in its Third-Party Complaint as of January 2003 when it received copies of the Kubitzes' declarations. Thus, Nelcela's claims against Carl and Flora "Pete" Kubitz accrued on or before January 2003, and possibly as early as 2001. Because the applicable statute of limitations periods for Nelcela's claims are two and three-years, Nelcela must have brought its two-year claims by at least January 3, 2005 and its three-year claims by at least January 3, 2006. Nelcela, however, waited to file its Third-Party Complaint until November 17, 2006, which is nearly one to two years after the expiration of the applicable statues of limitations. Consequently, all of the claims in Nelcela's Third-Party Complaint should be dismissed as being time barred because the applicable statutes of limitations have expired. II. NELCELA'S COUNT ONE IN ITS THIRD-PARTY COMPLAINT SHOULD BE DISMISSED FOR FAILING TO PLEAD ALLEGATIONS OF FRAUD WITH PARTICULARITY PURSUANT TO FED. R. CIV. P. 9(b). Count One of Nelcela's Third-Party Complaint is based on the Kubitzes' allegedly fraudulent statements. [Nelcela Third-Party Complaint (Dckt. No. 399) at ¶ 49-59.] "To avoid dismissal for inadequacy under Rule 9(b), [the third-party] complaint would need to `state the [date,] time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.'" Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986)). Failing to comply with Fed. R. Civ. P. 9(b) and the relevant case law, however, Nelcela fails to set forth these requisite details of the alleged statements. For the reasons stated above and also for the reasons stated in Lexcel, POST, and MTSI's Motion to Strike Nelcela's Affirmative Defenses, Counterclaims, and Third4
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Party Complaint (Dckt. No. 410) at 6-7, Nelcela's Count One in its Third-Party Complaint should be dismissed for failing to comply with Rule 9(b).

RELIEF REQUESTED For the foregoing reasons, Carl Kubitz and Flora Kubitz respectfully request the Court to dismiss Nelcela's Third-Party Complaint against them.

RESPECTFULLY SUBMITTED this 26th day of December, 2006. 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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Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 (602) 364-7000

CERTIFICATE OF SERVICE I hereby certify that, on December 26, 2006, Carl Kubitz and Flora Kubitz's Motion to Dismiss 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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566300/0201990