Menalco, FZE et al v. Buchan et al

Filing 340

ORDER Granting in part and Denying in part 272 Motion for Summary Judgment. Granting Defendant/Cross-Defendant Mark Bone-Kneell's 273 Motion for Summary Judgment. Granting in part and Denying in part 275 Motion for Summary Judgment. Parties shall file proposed joint pretrial on remaining claims no later than 3/5/10. Signed by Judge Philip M. Pro on 1/31/10. (Copies have been distributed pursuant to the NEF - AXM)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 P re se n tly before the Court is Defendant/Cross-Defendant Robert Buchan's M o tio n for Summary Judgment (Doc. #272), filed on July 28, 2009. Plaintiffs filed an O p p o s itio n (Doc. #290) on August 13, 2009. A ls o before the Court is Defendant/Cross-Defendant Mark Bone-Knell's Motion f o r Summary Judgment (Doc. #273), filed on July 28, 2009. Plaintiffs filed an Opposition (D o c . #291) on August 13, 2009. Mark Bone-Knell filed a Reply (Doc. #308) on S e p te m b e r 18, 2009. A ls o before the Court is Plaintiffs' Motion for Summary Judgment (Doc. #275), f ile d on July 28, 2009. Defendant Mark Bone-Knell filed an Opposition (Doc. #309) on S e p te m b e r 18, 2009. Plaintiffs filed a Reply (Doc. #313) to Mark Bone-Knell's Opposition o n October 1, 2009. Defendant Robert Buchan filed an Opposition (Doc. #317) on October 1 4 , 2009. Plaintiffs filed a Reply (Doc. #326) on October 28, 2009. Defendants Phoenix T e c h n o lo g y Holdings, Inc., and Schimatic Cash Transactions Network.com filed an O p p o s itio n (Doc. #318) on October 19, 2009. Plaintiffs filed a Reply (Doc. #328) on N o v e m b e r 2, 2009. v. R O B E R T GORDON BUCHAN, et al., Defendants. M E N A L C O , FZE, et al., P la in tif f s , UNITED STATES DISTRICT COURT D IS T R IC T OF NEVADA *** ) ) ) ) ) ) ) ) ) ) )

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I . BACKGROUND P la in tif f The International Investor, K.S.C.C. ("TII") is a publicly traded Kuwaiti c o m p a n y which conducts business in the areas of non-banking financial services and in v e s tm e n t banking. (Pls.' Mot. for Summ. J. (Doc. #275) ("Pls.' MSJ"), Ex. B at 2.) P la in tif f Menalco, FZE ("Menalco") is a limited liability corporation organized under the la w s of the United Arab Emirates, and is TII's wholly owned subsidiary. (Id.) As part of T II's non-banking financial services business, TII began developing a loyalty business m o d e l which it called "Selektpoints," a registered trademark owned by TII. (Id.) A loyalty program rewards customers for desired behavior. (Def. Buchan's O p p 'n to Pls.' Mot. Summ. J. (Doc. #317) ["Buchan Opp'n"], Ex. A ("Buchan Aff.") at 2.) It provides merchants with the opportunity to identify and manage relationships with their b e s t customers, and customers benefit by earning rewards for their purchasing behavior as lo ya l customers. (Buchan Opp'n, Ex. J.) Selektpoints is a worldwide loyalty program using s m a rt chip technology in credit and debit cards. (Pls.' MSJ, Ex. A1.) Selektpoints provides f o r issuer banks, called "landlord banks," to rent space on the debit or credit card through u s e of a loyalty application loaded onto the smart chip. (Id.) The consumer can use the c a rd to make a payment and to collect loyalty points in a loyalty program at the same time u s in g the same card. (Id.) The card also captures consumer purchase data which can be u s e d by participating merchants and provides for third party management of merchants' lo ya lty programs. (Id.) In January 2005, Edward Holmes ("Holmes"), a TII executive, hired Defendant R o b e rt Buchan ("Buchan") to work for TII's loyalty division. (Buchan Aff. at 1; Pls.' MSJ, E x . B at 3.) Although Buchan ultimately reported to TII, Buchan entered into employment a g re e m e n ts with third party companies and was assigned to work as Chief Operating O f f ic e r of Retail Financial Services for TII's Loyalty Division. (Buchan Aff. at 3, 5.) Buchan's understanding as to why he was employed by intermediary companies was 2

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b e c a u s e United Arab Emirates law required a company wishing to maintain employees in th e Emirates to establish an entity there, and TII had no such entity. (Id. at 4.) According to Buchan, from the time he was hired and throughout his employment re la tio n s h ip with TII, he was "advised verbally and in writing that a primary objective was to secure investment and/or joint venture opportunities to bring Plaintiffs' loyalty business to the global marketplace." (Id. at 3.) Buchan avers that when he started at TII, its p ro p o s e d loyalty program was a "bare bones merchant-based Sharia compliant concept." (Id. at 4.) Buchan advised TII the concept as it then existed was not workable,1 and he b e g a n working with Holmes over the ensuing months to design the Selektpoints program. (Id.) In March 2006, Buchan left the employ of the intermediary company to accept a jo b with another entity unrelated to TII. (Id. at 5.) According to Buchan, Holmes flew to D u b a i to "implore" him to stay and offered Buchan a new contract. (Id. at 6.) Buchan e n te re d into an employment contract with TII on June 1, 2006. (Id.) According to Buchan, throughout 2006, he and Holmes worked to bring S e le k tp o in ts to the global marketplace. (Id.) Buchan recommended to TII that it consider c o n ta c tin g Defendants Schimatic Cash Transactions Network.com ("SCTN") and Phoenix T e c h n o lo g y Holdings Inc. ("Phoenix"), because these companies owned and licensed p a te n te d software technologies that could assist in bringing Selektpoints to market in certain te rrito rie s . (Id.) Defendant SCTN is a Nevada corporation which owns several patents, including o n e for a "Method and System for Allocating and Redeeming Incentive Credits." (SCTN/Phoenix Opp'n to Pls.' Mot. for Sanctions (Doc. #194), Ex. 1; SCTN/Phoenix Ans.

The Court considers Buchan's statement that he told TII the concept was not workable not for the truth of the matter asserted, i.e., that the concept was in fact not workable, but for the fact that he so advised TII. 3

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& Verified Countercls. & Crosscls. (Doc. #19) ["Countercl."] at 24.) SCTN has been d e v e lo p in g loyalty software since 1994 and has spent approximately $70 million in d e v e lo p in g the software and technology. (Countercl. at 26.) The patented technology c o n s is ts of software and other technology for a method of implementing a loyalty program o n a smart chip embedded in a credit or debit card which will process the loyalty transaction a n d associated data simultaneously with the purchase transaction. (Id.) SCTN has patented th is technology in the United States, Canada, Mexico, Australia, and Japan. (Id. at 26-27.) Defendant Phoenix is a Turks and Caicos Islands corporation which has the exclusive w o rld w id e rights to license SCTN's patented technology. (Id. at 25.) Phoenix had an agreement with Krako, Inc. pursuant to which Nik Korakianitis (" K o ra k ia n itis " ) was to market the SCTN/Phoenix technology and receive sales c o m m is sio n s on any licenses Phoenix signed based on his efforts. (SCTN/Phoenix Opp'n to Pls.' Mot. for Sanctions (Doc. #194), Ex. 1.) Korakianitis had business cards with S C T N 's logo, name, and website, and which identified Korakianitis as "Executive Vice P re s id e n t Business Development," with an email address at SCTN. (Pls.' MSJ, Ex. A9 at 6 8 -6 9 .) Korakianitis used the SCTN email address throughout the time he had a business re la tio n s h ip with SCTN. (Id. at 70.) Korakianitis also had business cards for several other e n titie s for which he performed sales services, including Selektpoints. (SCTN/Phoenix O p p 'n to Pls.' Mot. Summ. J. (Doc. #318) ["SCTN Opp'n"], Ex. 7 at 28.) According to K o ra k ia n itis , it is common for him to represent himself as an employee of the companies w ith which he has contracted. (Id. at 27.) However, Korakianitis lacked signatory authority to bind SCTN. (Id. at 292.) Korakianitis met with Buchan and Holmes for TII to evaluate th e SCTN/Phoenix software. (Id. at 32.) In September 2006, Phoenix and TII entered into a Licensing Agreement for S C T N to provide a customized software program to implement the Selektpoints program. (Buchan Aff. at 7; Pls.' MSJ, Ex. A10 at 128, Ex. A11.) Pursuant to the Licensing 4

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A g re e m e n t, Phoenix agreed to grant TII a non-exclusive license for the SCTN technology in exchange for licensing fees. (Pls.' MSJ, Ex. A11.) Although the license was not e x c lu s iv e , it was Phoenix's and SCTN's "policy . . . not to license new Licensees where th e ir business is directly competitive without reviewing the impact on the business of a p re v io u s licensee." (Id. at 4.) Pursuant to the Agreement, TII agreed to hold confidential " a ll information relating to SCTN Applications, Products, Technologies, and other In te lle c tu a l Property, including accompanying documentation." (Id. at 7.) Upon te rm in a tio n of the Licensing Agreement, TII had to return all SCTN products and d o c u m e n ta tio n provided to TII or to an authorized affiliate or distributor of TII. (Id. at 9.) Appendix A to the Agreement describes the various products Phoenix was to provide under th e Licensing Agreement, and states, in all capital letters, "all features may require system m o d if ic a tio n to be considered acceptable for deployment." (Id. at 13-15.) The Licensing Agreement referenced a possible change in control of S e le k tp o in ts . Section 2.4 of the Licensing Agreement provides as follows: L ic e n s o r also confirms its knowledge of TII's plans to effect a change o f control of its Loyalty Business through inviting in new investors, a n d the Licensor agrees that the assignment or sub-licensing mentioned a b o v e in this subsection will be approved whether the change of c o n tro l comes about or not. (Id .) Holmes specifically negotiated for this provision. (SCTN's Opp'n, Ex. 9 at 436.) In September 2006, Buchan met Defendant Mark Bone-Knell ("Bone-Knell") at a social function. (Buchan Aff. at 7.) Bone-Knell recommended TII file a patent on the S e le k tp o in ts concept. (Id.) In October and November 2006, Bone-Knell and Buchan d is c u s se d via email the cost estimate for filing patent applications in the United Kingdom a n d the United States, and who should be listed as the inventors and owners on the patent a p p lic a tio n . (Pls.' MSJ, Exs. A19-A20.) Buchan instructed Bone-Knell to file the a p p lic a tio n in the name of a company called "Marlin" and to identify the inventors as B u c h a n and Holmes. (Pls.' MSJ, Ex. A20.) TII's Chairman of the Board, Adnan Al-Bahar 5

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(" A l-B a h a r" ), approved the application, and Bone-Knell filed it in the United Kingdom in N o v e m b e r 2006. (Buchan Aff. at 8; Pls.' MSJ, Ex. A10 at 164, Ex. B at 2.) Although prior c o m m u n ic a tio n s between Buchan and Bone-Knell referenced filing the patent application in M a rlin 's name, the patent application actually filed in the United Kingdom lists Menalco as th e applicant. (Def. Bone-Knell's Reply to Pls.' Opp'n to Bone-Knell's Mot. Summ. J. (D o c . #308) ["Bone-Knell Reply"], Ex. A.) The application does not list Buchan and H o lm e s as the inventors. (Id.) Bone-Knell invoiced Menalco for his services related to this a p p lic a tio n on December 4, 2006, and Menalco paid for his services. (Bone-Knell Reply, E x . C; Buchan Aff. at 8.) Bone-Knell denies he ever filed a patent application identifying th e inventors or owners as Buchan or Holmes. (Bone-Knell Reply, Decl. of Bone-Knell.) D u rin g this time frame, Holmes and Buchan discussed with Bone-Knell that TII w a s "looking to sell" Selektpoints and they would welcome any advice or assistance in f in d in g purchasers or funding partners. (Buchan Aff. at 9.) According to Buchan, one re a s o n TII needed to sell Selektpoints was because it would violate Sharia law for TII to o p e ra te Selektpoints. (SCTN Opp'n, Ex. 11 at 81-82.) Sharia law instructs Muslims with re s p e c t to how to deal in money and investments, and it prohibits the receiving or paying of in te re s t or dealing in futures, as well as making or profiting from anything that is harmful to h u m a n health. (Pls.' Reply to SCTN/Phoenix's Opp'n to Pls.' Mot. Summ. J. (Doc. #328) [ " P ls .' Reply to SCTN Opp'n"], Ex. 2 at 166.) According to Buchan, TII wanted to sell S e le k tp o in ts entirely, or to reduce TII's interest to a non-controlling interest, to avoid any c o n f lic t with Sharia law to the extent Selektpoints could be viewed as aiding and abetting u n la w f u l banks, meaning banks which charge interest. (SCTN Opp'n, Ex. 11 at 81-82.) However, TII's chief legal officer, Adnan Abrahim ("Abrahim"), testified S e le k tp o in ts was Sharia compliant because Sharia law does not forbid a company from d e a lin g with a bank that charges interest so long as the deal between TII and the bank does n o t involve the charging of interest. (Pls.' MSJ, Ex. B; Pls.' Reply to SCTN Opp'n, Ex. 2 6

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a t 168-69.) According to Abrahim, because Selektpoints was to charge fees and not in te re s t, it was Sharia-compliant. (Pls.' MSJ, Ex. B.) Abrahim denies TII ever considered s e llin g Selektpoints, either to comply with Sharia law or for business reasons. (Pls.' Reply to SCTN Opp'n, Ex. 2 at 172.) However, according to Buchan, TII Chairman Al-Bahar in s tru c te d him to find a buyer for Selektpoints and also to explore joint venture o p p o rtu n itie s for Selektpoints. (Pls.' Reply to Buchan's Opp'n to Pls.' Mot. Summ. J. (D o c . #290) [Pls.' Reply to Buchan Opp'n"], Ex. 1 at 38-39; SCTN Opp'n, Ex. 11 at 83.) The record is devoid of any sworn testimony from Al-Bahar. In mid to late November 2006, Bone-Knell introduced Buchan to Defendants T im o th y Koster ("Koster") and Christopher Eddy ("Eddy"), who had formed Defendant C o n v e rg e n c e Capital Limited ("Convergence"). (Buchan Aff. at 10; SCTN Opp'n, Ex. 6 at 1 5 .) According to Eddy, Buchan told him that TII and Al-Bahar wanted to sell Selektpoints b e c a u s e it was not Sharia-compliant. (SCTN Opp'n, Ex. 6 at 46.) Koster and Eddy entered in to a non-disclosure agreement with Menalco which Holmes signed on behalf of T II/M e n a lc o . (Buchan Aff. at 10, Buchan Opp'n, Ex. E.) Among the recitals in the nond is c lo s u re agreement was that the parties "desire to disclose proprietary information relating to the potential commercial involvement of the Parties in the investment/procurement of e q u ity in a company involving Financial Services and/or Loyalty Services and Products." (Pls.' MSJ, Ex. A24.) On November 30, 2006, Holmes, Buchan, Koster, and Eddy held a m e e tin g at which Holmes reviewed an initial draft proposal for TII to sell Selektpoints. (Buchan Aff. at 10.) O n December 11, 2006, Koster and Eddy presented this proposal in person to AlB a h a r and other TII senior staff. (Id.; Buchan's Opp'n, Ex. F.) The proposal was to p u rc h a s e Selektpoints from TII for $17 million through the formation of a new, as yet u n id e n tif ie d company referred to as "NewCo." (Buchan Aff. at 10-11; Exs. to Mot. to D is m iss (Doc. #55), Ex. C.) Along with the $17 million payment, TII also would receive a 7

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th irty-f iv e percent interest in NewCo. (Buchan Aff. at 11.) TII rejected the offer. (Pls.' M S J , Ex. B at 5.) According to Buchan, during the December 11 meeting, Al-Bahar explained that B u c h a n and most of the other current Selektpoints employees would be employed with the n e w company after a deal closed, while Holmes would continue to work for TII. (Buchan A f f . at 12; Pls.' Reply to Buchan Opp'n, Ex. 1 at 38-39.) Buchan avers that Al-Bahar in s tru c te d him to work with other businesses to prepare proposals because Buchan would be o n the "buy side" of any deal. (Pls.' Reply to Buchan Opp'n, Ex. 1 at 39.) Buchan worked w ith Eddy and Koster in January to prepare a new proposal. (Buchan Aff. at 13.) According to Korakianitis, throughout this period he was instructed by Buchan; Michael D a rc h ("Darch"), TII's controller; and Samuel Assaad ("Assaad"), Menalco's head of b u s in e s s development for Selektpoints, to educate Koster and Eddy on the loyalty business b e c a u s e they were working to put a strategy together to find investors for Selektpoints. (SCTN Opp'n, Ex. 5 at 12, Ex. 7 at 27, 54-55, 57.) On February 16, 2007, Convergence and Phoenix entered into a Mandate to Act. (Countercl., Ex. 12.) Pursuant to the Mandate to Act, Convergence had a one-year time f ra m e during which it would represent Phoenix for purposes of seeking capital investment o r buyers, be it through a deal with TII involving the spinoff of Selektpoints into a new c o m p a n y holding both the Selektpoints program and the Phoenix technology rights, or o th e rw is e . (SCTN Opp'n, Ex. 9 at 288-89; Countercl., Ex. 12; SCTN/Phoenix Opp'n to P ls .' Mot. for Sanctions (Doc. #194), Ex. 1.) On February 18, 2007, Koster and Eddy presented a second proposal in person to A l-B a h a r. (Buchan Aff. at 12, 13; Buchan Opp'n Ex. G; Exs. to Mot. to Dismiss (Doc. # 5 5 ), Ex. D.) Pursuant to the second proposal, SCTN, Phoenix, and two other companies, S m a rt Marketing and Krako ("SMK") were to be included in the deal by having forty-nine p e rc e n t of these respective companies folded into NewCo along with Selektpoints. (Buchan 8

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A f f . at 13.) TII was to receive between $200 million and $400 million after the strategic in v e s to rs invested. (Id.) Al-Bahar rejected the proposal but requested the deal be re s tru c tu re d with TII receiving more benefit than Phoenix, SCTN, and SMK. (Id. at 14.) A c c o rd in g to Buchan, Al-Bahar demanded they negate the value of SCTN and that the p ro p o s a l have a much lower return for SCTN. (SCTN Opp'n, Ex. 11 at 174.) Eddy and K o s te r sent Al-Bahar a third proposal on February 21, which Al-Bahar again rejected. (Buchan Aff. at 14; Buchan Opp'n, Ex. H; Exs. to Mot. to Dismiss (Doc. #55), Ex. E.) According to Abrahim, TII never took the offer from Convergence seriously. (Pls.' MSJ, E x . A10 at 174.) According to Buchan, following Al-Bahar's rejection of the third proposal, B u c h a n worked with Koster and Eddy to prepare another proposal. (Buchan Aff. at 14.) This proposal was to involve formation of a new company, which previously had been re f e rre d to as NewCo in the presentations but now was being called "CBData," to acquire S e le k tp o in ts and either acquire the Phoenix/SCTN entities, or contract with them for a s o f tw a re license. (Id. at 14-15.) According to Buchan, Al-Bahar encouraged exploration of a joint venture with Convergence. (Id. at 14.) Buchan avers that Al-Bahar knew that upon a deal being made, certain employees would go forward with the new company. (SCTN O p p 'n , Ex. 11 at 123.) According to Assaad, Holmes informed him that if a sale of S e le k tp o in ts went through, Assaad would be on the "buy side," and would work thereafter w ith the new organization. (Pls.' MSJ, Ex. A18 at 90-92.) Assaad testified he discussed th e s e plans with Neil Smith, TII's Vice President of Business Development. (Id. at 94-95.) O n March 6, 2007, TII and Phoenix entered into additional licensing agreements f o r other regions not included in the September 2006 Licensing Agreement, including E u ro p e , Asia, and South Africa. (Countercl. at 32.) Later that month, Al-Bahar sent an e m a il to Buchan, Holmes, and Darch, seeking to "improve" the licensing agreements with P h o e n ix . (SCTN Opp'n, Ex. 26.) Al-Bahar suggested alterations to the areas covered by 9

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th e licensing agreements. (Id.) Additionally, he wanted to renegotiate the per transaction c o s t, stating the rate is "way too high" and "we may find it cheaper to take their competitor a n d finance them to build a better solution." (Id.) Buchan responded by arguing against a p ro p o s a l to renegotiate the licensing terms with Phoenix, as they risked damaging their re la tio n s h ip with an important vendor. (Id.) Additionally, Buchan wrote that he was " tro u b le d by trying to hold a gun to our most important vendor's head by trying to re n e g o tia te a contract, that we signed in good faith, over a penny or at most, two." (Id.) In th e email to Al-Bahar, Buchan made reference to "[t]he banks and companies interested in p o s s ib le acquisition of us." (Id.) On April 9, 2007, Bone-Knell sent an email to SCTN/Phoenix principal Miki R a d iv o js a ("Radivojsa") discussing the strategy for assigning or licensing Phoenix's in te lle c tu a l property to Newco. (Pls.' Opp'n to Bone-Knell's Mot. Summ. J. (Doc. #291) [ " P ls .' Opp'n to Bone-Knell"], Ex. 3.) Bone-Knell requested information from Radivojsa a s to what intellectual property would be included, and what advantages that software and f u n c tio n a lity would provide to Newco over its competition. (Id.) Bone-Knell referred to th e future entity as both Newco and "CBD." (Id.) Radivojsa supplied Bone-Knell with p e rtin e n t information on April 13. (Id.) In an April 23, 2007 email to Holmes and others, Al-Bahar stated that SCTN and its competitor, WRT, were in tight financial situations. (SCTN Opp'n, Ex. 25.) Al-Bahar d ire c te d his employees to "[t]hink strategically of how do we get max leverage, build a c o m p e tito r to SCTN for us but not for everyone else, block the use of the software to direct c o m p e tito rs , etc." (Id.) On April 25, 2007, Radivojsa exchanged emails with Eddy, Koster, and Buchan d is c u s sin g CBData's possible purchase of Phoenix. (Pls.' MSJ, Ex. A27.) As Eddy d e s c rib e d the proposed structure of the deal, Buchan, Eddy, and Koster would form C B D a ta . (Id.) Phoenix, Smart Marketing, Airos, and Krako would grant CBData purchase 10

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o p tio n s , which CBData could exercise upon receipt of funds from strategic global investors. (Id.) Radivojsa thereafter sent an email to Korakianitis expressing concerns with the p ro p o s e d deal, including that Eddy and Koster had no risk exposure while others had in v e s te d significant time and money, that Eddy and Koster may not be able to deliver, and th a t Koster and Eddy were trying to sidestep dealing with SCTN because SCTN was a p u b lic ly held company which would require a tender offer. (Pls.' MSJ, Ex. A28.) O n April 29, 2007, Consumer Behavioural Data Corporation Limited ("CBData") w a s incorporated in the Cayman Islands. (Buchan Aff. at 14; Pls.' MSJ, Ex. A26.) Koster w a s CBData's sole shareholder. (Buchan Aff. at 15.) That same date, Bone-Knell sent an e m a il to Radivojsa, Koster, and Eddy, stating he has been "tasked with identifying and re c o rd in g a detailed listing of the actual IP currently held or under development in the three p riv a te ly held companies which are intended to be rolled up into Newco (i.e. Airos, Smart M a rk e tin g etc)." (Pls.' MSJ, Ex. A26.) CBData sought to identify intellectual property rig h ts owned by these companies that potentially could be assigned to CBData so CBData c o u ld inform investors about the intellectual property protection that could be afforded to in v e s to rs in CBData. (Buchan Aff. at 15.) In late May 2007, Radivojsa, Buchan, Eddy, and Koster discussed a deal for C B D a ta to purchase Phoenix and SMK, and discussed drafting a memorandum of u n d e rs ta n d in g ("MOU"). (Pls.' MSJ, Exs. A33-34.) In an email discussing the drafting of th e MOU, Radivojsa stated, "we also want to make sure that the TII issue is deal[t] with f a irly (ie [sic] there is some buyout of selektpoints, agreement with Adnan, . . .) so we will a d d some points in MOU about that as well. Without that being addressed, we will not p ro c e e d ." (Id.) Eddy responded, "We always contemplated making Adnan an offer for S e le k tp o in ts ­ it[']s in all of the deal diagrams we have proposed. We will propose a fair d e a l to him and hopefully he will be a seller." (Id.) /// 11

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T h e draft MOU provided for CBData to execute a non-exclusive licensing a g re e m e n t with Phoenix. (Pls.' MSJ, Ex. A33.) As part of this non-exclusive licensing a g re e m e n t, provision would be made "for legal costs, judgements [sic] if TII launches legal a c tio n against Phoenix since TII is a customer of Phoenix, and CBD and TII may have the s a m e target customers." (Id.) A valuation would be completed of Phoenix, SCTN, Airos, K ra k o , and Ravient, and Phoenix was to present to CBData an option to purchase these c o m p a n ie s . (Id.) CBData was to procure from TII "a guarantee from TII that it will not s ta rt legal action against any parties listed in the `Parties' section with respect to this tra n s a c tio n . TII is a customer of Phoenix, and CBD and TII may have the same target c u s to m e rs and legal action may be started." (Id.) Although the MOU identified TII as a p a rty to the agreement, the draft MOU had no signature line for a TII representative. (Id.) The MOU never was signed or executed by the parties. (Id.; SCTN Opp'n, Ex. 6 at 76.) K o ra k ia n itis testified that he thought Al-Bahar knew of CBData and the various b u yo u t proposals. (SCTN Opp'n, Ex. 7 at 174, 307.) Korakianitis also testified that R a d iv o js a would not move forward with such a deal without TII's participation, even th o u g h Phoenix's licensing agreement with TII was non-exclusive and Phoenix could have w o rk e d with CBData anyway. (Id. at 307-08.) Radivojsa likewise testified that Phoenix a n d SCTN always understood that TII/Menalco was aware of CBData's existence and a p p ro v e d of its efforts. (SCTN/Phoenix Opp'n to Pls.' Mot. for Sanctions (Doc. #194), Ex. 1 .) Radivojsa also testified he never had any reason to believe Buchan did not have a u th o rity to act on behalf of Selektpoints. (SCTN's Opp'n, Ex. 9 at 491, 494.) In the meantime, TII ceased paying Phoenix for its invoices beginning in May 2 0 0 7 . (Countercl. at 47.) In June, Phoenix began to request payment of its invoices. (Id.) TII sent Yzelle DeWet ("DeWet"), a TII corporate representative, to SCTN's facilities "to d e te rm in e the nature of SCTN's activities and bills on behalf of TII." (Pls.' MSJ, Ex. B at 3 ; Countercl. at 56.) At the end of the trip, DeWet requested that the Licensing Agreement 12

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b e changed to reduce Phoenix's fees and to make the contract exclusive. (Countercl. at 57.) Throughout June, July, and August, Phoenix questioned TII on when it would be p a id on the outstanding invoices. (Id. at 47-48.) TII responded through various emails s u g g e s tin g the invoices would be paid shortly. (Id. at 47-49; SCTN Opp'n, Exs. 18-20.) As la te as August 14, TII confirmed it would pay by August 30. (Countercl. at 49.) Throughout this period, Phoenix continued to provide services to TII, including providing tra in in g videos, user guides, and technical support. (Id. at 58-60.) According to Phoenix, it is owed $1,466,731.61 in unpaid invoices. (Id., Ex. 10.) M e a n w h ile , between May and August 2007, CBData planned fund raising p re s e n ta tio n s to financial institutions. (Buchan Aff. at 16.) For example, on May 29, K o s te r sent an email to individuals at Google with a proposal regarding CBData and stated C B D a ta is "now positioned to be one of the largest global providers of consumer behavioral d a ta ." (Pls.' Reply to Bone-Knell's Opp'n to Pls.' Mot. Summ. J. (Doc. #313), Ex. 6.) CBData also made a proposal to MasterCard. (Id., Ex. 7 at 225.) CBData also entered into n o n -d is c lo s u re agreements with various financial institutions. (Buchan Aff. at 16; Buchan O p p 'n , Ex. I.) According to Buchan, the presentations indicated that CBData had not yet a c q u ire d Selektpoints and that the purchase of Selektpoints was a key element to CBData's b u s in e s s strategy. (Buchan Aff. at 17.) Assaad testified he attended at least one presentation given to an entity called D u k e Equity during which it was represented that Assaad was a TII employee, but that he w o u ld be moving forward with CBData when the deal went through. (Pls.' MSJ, Ex. A18 a t 93-94.) According to Assaad, he worked on CBData material while being paid by TII b e c a u s e he understood CBData "was the company facilitating this big deal for Mr. A l-B a h a r, so certainly any work that I would have done would have been for TII or the g re a te r good thereof." (SCTN Opp'n, Ex. 5 at 122-23.) Assaad further testified he had a C B D a ta business card, email address, and the title of Vice President Global Sales for 13

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C B D a ta because "that was the perceived management team that was going to be going f o rw a rd with the new organization." (Pls.' MSJ, Ex. A18 at 90.) Assaad testified he u n d e rs to o d that Al-Bahar and others at TII knew about CBData. (Id. at 90-92.) Buchan lik e w ise avers he worked with CBData and engaged in activity to secure investment and jo in t ventures for Selektpoints as a liaison for TII/Menalco. (Buchan Aff. at 17.) E f f o rts also were directed at obtaining a patent for CBData and for creating C B D a ta contracts. For example, Bone-Knell filed a patent application with the United K in g d o m patent office on June 14, 2007 in CBData's name. (Pls.' MSJ, Ex. A30.) The p a te n t describes a­ m e th o d , system and apparatus for implementing a consumer incentive p ro g ra m which provides for the capture, transmission and storage of c o n s u m e r transaction information, and the subsequent analysis of said in f o rm a tio n to provide consumer behavioral data to participating in c e n tiv e scheme Transaction Entities, Issuing Institutions, Device is s u in g companies or third parties to thereby enable the identification o f specific persons, consumers and/or groups of consumers meeting s p e c if ic consumer profile criteria to which subsequent marking and s a le s campaigns and the like can be targeted. (B o n e -K n e ll Reply, Ex. F.) Buchan testified he would not be surprised to learn that the p a te n t Bone-Knell applied for on Menalco's behalf in November 2006 was similar to the p a te n t application Bone-Knell applied for on CBData's behalf in June 2007. (Pls.' Opp'n to Bone-Knell, Ex. 4 at 206.) According to Buchan, both patent applications are similar to a p p lic a tio n s filed by other companies such as American Express. (Id.) In mid July, BoneK n e ll sent an email to Buchan discussing Bone-Knell's efforts at modifying a generic m a s te r agreement forwarded to him "into a format which looks sufficiently different from its original form, acceptable by the Banks/Financial Institutions and ensures CBD's ability to enforce its rights." (Pls.' Opp'n to Bone-Knell, Ex. 5.) T h ro u g h o u t the period, Buchan, Holmes, and other Selektpoints employees used p e rs o n a l email addresses as opposed to their TII or Selektpoints email addresses when d is c u s sin g CBData business. According to Assaad, he, Buchan, and other Selektpoints/TII 14

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e m p lo ye e s sometimes needed to use their personal email addresses because the Selektpoints e m a il server often was not in operation. (Pls.' MSJ, Ex. A18 at 109-11.) In an August 24, 2 0 0 7 email, Assaad asked another Selektpoints employee, Doug Sutherland, "Can they m o n ito r . . . things like hotmail or yahoo e-mails as well?" (Id. at 209.) According to A s sa a d , by "they" he meant TII's wholly owned subsidiary, Procco, which was a processing c e n te r. (Id. at 209-10.) According to Assaad, he was not concerned about the email m o n ito rin g in an effort to hide his communications regarding CBData from Al-Bahar b e c a u s e "Al-Bahar knew that there was a deal going forward. He sought the deal. He e n g a g e d the individuals that went out to go get the deal. He had me provide sensitive, h ig h ly sensitive, information to these individuals." (Id. at 223.) Rather, Assaad testified he w a s concerned the individuals at Procco would monitor his emails because those particular p e o p le did not know Selektpoints was for sale. (Id. at 211.) A c c o rd in g to Abrahim, at a July 2007 TII executive management strategy m e e tin g , Buchan claimed to have more than 200 merchants signed up for Selektpoints. (Pls.' MSJ, Ex. A10 at 129.) However, senior management was concerned about these re p re se n ta tio n s because Buchan had made similar comments before but had never shown th e m a list of merchants and Buchan could not provide the list when asked at the meeting. (Id. at 130, 131-32.) TII thereafter initiated an internal investigation. (Pls.' MSJ, Ex. B at 3 .) According to Abrahim, TII did not discover Koster, Eddy, and Buchan formed C B D a ta until the summer of 2007. (Id. at 5.) Abrahim also avers that this investigation re v e a le d that SCTN paid Buchan a "series of secret unlawful payments" from S C T N /P h o e n ix to Buchan. (Id. at 3.) However, Buchan and Korakianitis testified that the p a ym e n ts were not from SCTN or Phoenix. Rather, the payments were from Korakianitis to B u c h a n for unpaid work Buchan performed for a company Korakianitis used to own. (Buchan Aff. at 2; SCTN Opp'n, Ex. 7 at 152-54.) Buchan and Korakianitis deny the 15

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p a ym e n ts were related to SCTN/Phoenix other than that when Korakianitis received p a ym e n t from SCTN/Phoenix, he would use that money to pay Buchan on the prior o b lig a tio n . (Pls.' MSJ, Ex. A9 at 159.) According to Korakianitis, SCTN/Phoenix had no k n o w le d g e of these payments, and he would pay Buchan out of other funds he received f ro m sales commissions he received from other companies as well. (Id. at 159-60; SCTN O p p 'n , Ex. 7 at 152-53, 160.) Radivojsa denied he knew about or approved payments from S C T N /P h o e n ix to Buchan. (SCTN Opp'n, Ex. 9 at 529.) O n August 28, 2007, CBData was scheduled to make a presentation to a potential in v e s to r, Signature Group. (Pls.' Opp'n to Bone-Knell, Ex. 4 at 212-13.) Although this w a s CBData's first presentation, CBData had non-disclosure agreements with other c o m p a n ie s , such as The Fund, LLC. (Id. at 213.) In an August 24, 2007 email, Koster s ta te d he would be enclosing with three separate emails the McKinsey Report,2 the Pepper C o rp o ra tio n analysis,3 and "financials" with First Data Corp under CBData's name. (Pls.' R e p ly to Bone-Knell's Opp'n to Pls.' Mot. Summ. J. (Doc. #313), Ex. 10.) In August 2007, Buchan was arrested by Dubai police. (Buchan Aff. at 17.) A f e w days later, Buchan was suspended from work with Plaintiffs, as was most of the S e le k tp o in ts personnel. (Id.) Buchan attempted to leave Dubai but was stopped at the a irp o rt and arrested. (Id. at 18.) Buchan spent three weeks in jail before leaving the c o u n try.4 (Id.) Abrahim states that while Buchan was being investigated by the authorities

McKinsey & Company performed an assessment on the Selektpoints program to see if it was viable and to value the program. (SCTN Opp'n, Ex. 5 at 41, Ex. 33.) The Pepper Corporation carried out a global assessment for Selektpoints. (SCTN Opp'n, Ex. 15 at 222-23.) Plaintiffs offer as an exhibit a purported copy of a Dubai court decision finding Buchan stole Selektpoints from Plaintiffs. (Pls.' MSJ, Ex. B1.) Buchan objects to the document. The Court will not consider this document. It is hearsay and is not a certified government document. Further, the document appears to be a Microsoft Word document entitled "Robert Buchan Conviction16
4 3

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in Dubai, "certain banks discontinued their business relationship with TII and Menalco." (Pls.' MSJ, Ex. B at 3.) On August 30, 2007, TII/Menalco filed suit in this Court against Buchan, H o lm e s , Koster, Eddy, Bone-Knell, Convergence, SCTN, Phoenix, and CBData. (Compl. (D o c . #1).) TII/Menalco generally asserts these Defendants conspired to misappropriate S e le k tp o in ts for their own use under the CBData name. TII/Menalco brings claims for f e d e ra l and state civil Racketeer Influenced and Corrupt Organizations Act ("RICO") v io la tio n s , misappropriation of trade secrets, civil conspiracy, fraud, breach of contract, b re a c h of fiduciary duty, unjust enrichment, and unfair competition. On September 5, Eddy sent Al-Bahar and Abrahim a proposal entitled "Re: A m e n d e d Proposal for Menalco/Selektpoints (`Transaction')." (Pls.' Reply to Bone-Knell's O p p 'n to Pls.' Mot. Summ. J. (Doc. #313), Ex. 14.) The proposal referred to the two prior p ro p o s a ls and suggested that at a prior meeting, Al-Bahar requested Convergence come b a c k with a simpler proposal. (Id.) The new proposal identifies Newco as CBData, and the p ro p o s a l states that CBData has made presentations to strategic global investors to "flesh o u t interest in a simplified Transaction format." (Id.) In September 2007, an article appeared in MoneyWorks magazine regarding S e le k tp o in ts . (Buchan's Opp'n, Ex. J.) The article describes the Selektpoints program, in c lu d in g that it is a global merchant funded program, that it utilizes the landlord bank c o n c e p t with one landlord bank, that it collects detailed transaction information such as s to c k keeping unit information, and administers direct marketing campaigns. (Id.) The a rtic le also describes the various revenue streams a landlord bank could expect under S e le k tp o in ts , what the merchant could expect to pay, and how much a consumer could e x p e c t to earn in rewards points. (Id.) Additionally, the article identified three landlord English.doc," suggesting it is a translation, with no verification that it is a true and accurate translation of the original. 17

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b a n k s that had signed up with Selektpoints. (Id.) According to Abrahim, the plans for Selektpoints were confidential and not in te n d e d to be shared outside TII. (Pls.' MSJ, Ex. B at 2.) In contrast, Buchan testified that A l-B a h a r never told him not to disclose how much Selektpoints pays per card, and all c ritic a l parts of the business model were disclosed by the MoneyWorks article and by other p u b lic presentations. (SCTN Opp'n, Ex. 8 at 264-67.) According to David Parker of P e p p e r Corporation, which carried out a global assessment for Selektpoints, the details on S e le k tp o in ts were made public through presentations at conferences and in the M o n e yW o rk s article. (Id., Ex. 15 at 222-23.) P rio r to filing the Complaint in this action, TII did not communicate to Phoenix o r SCTN that it thought Phoenix/SCTN was in breach of the Licensing Agreement. (Countercl. at 35; SCTN Opp'n, Ex. 9.) According to Buchan, the general consensus at TII w a s that TII/Menalco was satisfied that SCTN had provided the technology. (SCTN Opp'n, E x . 11 at 316-17.) According to Radivojsa, SCTN completed work on the initial d e v e lo p m e n t for Selektpoints by August 30, 2007, and besides some "tweaking," the project w a s ready to go forward from SCTN's perspective. (Id., Ex. 9 at 397, 519.) According to B u c h a n , SCTN timely performed its contractual obligations related to the launch of the S e le k tp o in ts program. (Pls.' MSJ, Ex. A8 at 108.) However, according to Abrahim, SCTN n e v e r completed adapting the program to Selektpoints' needs. (SCTN Opp'n, Ex. 24 at 1 4 3 - 4 4 .) On September 12 and 14, 2007, SCTN/Phoenix sent demand letters to TII re q u e s tin g the return of the SCTN/Phoenix technology from TII and any of its subsidiaries, b u s in e s s partners, or any other party who had received the technology through TII. (Countercl. at 36.) SCTN/Phoenix thereafter filed Counterclaims against TII/Menalco and C ro s s -c la im s against Buchan, Holmes, Koster, Eddy, Bone-Knell, Convergence, and C B D a ta . (Ans., Countercls. & Crosscls. (Doc. #19).) SCTN/Phoenix generally allege these 18

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C o u n te r and Cross Defendants conspired to devalue SCTN/Phoenix and withhold payment o n invoices to take advantage of SCTN's weak financial position to obtain the SCTN te c h n o lo g y at a reduced price. SCTN/Phoenix also allege TII/Menalco has failed to pay all s u m s due under the Licensing Agreement. SCTN/Phoenix bring claims for breach of c o n tra c t, breach of the duty of good faith and fair dealing, unjust enrichment, conversion, f ra u d , negligent misrepresentation, misappropriation of trade secrets, federal and state civil R IC O , civil conspiracy, unfair trade practices, and intentional interference with prospective e c o n o m ic advantage. Defendants Buchan and Bone-Knell now move for summary judgment on P la in tif f s ' claims for federal and state RICO violations, misappropriation of trade secrets, a n d civil conspiracy. Plaintiffs move for summary judgment on their own claims for federal a n d state civil RICO, civil conspiracy, misappropriation of trade secrets, breach of contract, a n d breach of fiduciary duty. Plaintiffs also move for summary judgment on SCTN's c o u n te rc la im s for misappropriation of trade secrets, conversion, intentional interference w ith prospective economic advantage, and the various claims related to breach of the L ic e n s in g Agreement.5 I I . OBJECTIONS D e f e n d a n ts SCTN and Phoenix object to Plaintiffs' exhibits A1, A3-A7, A11, A 1 3 -A 1 7 , A19-48, A50-A57, A64, and A66-A69 as unauthenticated. Defendants argue an a f f id a v it from Plaintiffs' counsel stating that the various exhibits were items produced in d is c o v e ry is insufficient to authenticate the documents. Plaintiffs respond that they s u f f ic ie n tly have authenticated the various exhibits through the attorney's affidavit.

No party moves for summary judgment on count four (fraud) or eight (unjust enrichment) of Plaintiffs' Complaint. Plaintiffs move for summary judgment on counts fourteen through seventeen of SCTN/Phoenix's Counterclaim. However, these counts are forms of relief, not separate theories of liability. 19

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T h e Court "can consider only admissible evidence in ruling on a motion for s u m m a ry judgment." Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir. 2002) (c itin g Fed. R. Civ. P. 56(e)). Exhibits must be authenticated to be admissible. Id. Authentication is satisfied by "evidence sufficient to support a finding that the matter in q u e s tio n is what its proponent claims." Fed. R. Evid. 901(a). Documents authenticated th ro u g h personal knowledge must be attached to an affidavit that meets the requirements of F e d e ra l Rule of Civil Procedure 56(e). Orr, 285 F.3d at 773-74. Additionally, the affiant m u s t be a person through whom the exhibits could be admitted into evidence. Id. Documents produced in discovery are deemed authentic when offered by a party opponent. Id. at 777 & n.20. The production in response to a discovery request acts as a judicial a d m is sio n that the documents are authentic. Id. "[W]hen a document has been a u th e n tic a te d by a party, the requirement of authenticity is satisfied as to that document with re g a rd s to all parties, subject to the right of any party to present evidence to the ultimate f a c t-f in d e r disputing its authenticity." Id. at 776. P la in tif f s ' counsel states in her affidavit that exhibits A1 through A69 were " p ro d u c e d or exchanged in the course of this litigation." (Pls.' MSJ, Aff. of Colleen M. C o yle at 2.) Plaintiffs' counsel identifies which documents were produced by which party b y reference to the different Bates numbers used by each party. (Id.) T h e Court will overrule the objection to exhibits A11, A27, A28, A33, A34, and A 6 4 as these documents were produced by SCTN/Phoenix in the course of discovery, and th u s SCTN/Phoenix admitted their authenticity. The Court also will overrule the objection to exhibits A1, A19-A24, A26, A29, A30, A45, A47, and A53-A56. Although these e x h ib its were produced by Defendant CBData and not Phoenix or SCTN, CBData produced th e m in response to discovery requests and has not denied their authenticity. Because the e x h ib its are authenticated as to one party, they are authenticated as to all. Further, SCTN a n d Phoenix do not dispute these documents are authentic, they argue only that Plaintiffs 20

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h a v e failed to authenticate them. However, Plaintiffs cannot authenticate documents they produced in discovery by s ta tin g through an attorney affidavit that the materials were produced in discovery and h e n c e are authentic, as this would not constitute an admission because the exhibits were not o f f e re d by a party opponent. Plaintiffs provide no basis for counsel to have personal k n o w le d g e as to the authenticity of Plaintiffs' documents. The Court therefore will sustain th e objection to exhibits A3-A7, A13-A17, A25, A31, A32, A35-A44, A46, A48, A50-A52, a n d A66-A69. The Court will not consider these documents in deciding the summary ju d g m e n t motions. T h e Court also will sustain the objection to exhibit A57. The document is not m a rk e d with any Bates number, and hence it is not clear that this document was produced in d is c o v e ry, and if it was, by which party. It does not appear to be a document produced in d is c o v e ry, but rather appears to be a letter from Plaintiffs' counsel to the former counsel for S C T N and Phoenix. Plaintiffs do not otherwise attempt to authenticate this exhibit. In response to SCTN's and Phoenix's objections, Plaintiffs argue that SCTN's a n d Phoenix's exhibits 12, 13, 16, and 22 likewise are not authenticated. The Court will s u s ta in the objection to these exhibits. SCTN and Phoenix have not authenticated these e x h ib its , and the exhibits were produced by SCTN and Phoenix in discovery, not by a party o p p o n e n t. III. DISCUSSION S u m m a ry judgment is appropriate "if the pleadings, the discovery and disclosure m a te ria ls on file, and any affidavits show that there is no genuine issue as to any material f a c t and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A fact is "material" if it might affect the outcome of a suit, as determined by the governing s u b s ta n tiv e law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is " g e n u in e " if sufficient evidence exists such that a reasonable fact finder could find for the 21

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n o n -m o v in g party. Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2 0 0 2 ). Initially, the moving party bears the burden of proving there is no genuine issue of m a te ria l fact. Leisek v. Brightwood Corp., 278 F.3d 895, 898 (9th Cir. 2002). After the m o v in g party meets its burden, the burden shifts to the non-moving party to produce e v id e n c e that a genuine issue of material fact remains for trial. Id. The Court views all e v id e n c e in the light most favorable to the non-moving party. Id. A . Plaintiffs' Federal Civil RICO Claims - Counts 1-2 of the Complaint In count one of the Complaint, Plaintiffs allege Defendants were participants in a n associated-in-fact enterprise engaged in a scheme to defraud through the formation of C B D a ta and marketing Plaintiffs' trade secrets to others in the industry as CBData's, th e re b y fraudulently obtaining Selektpoints and related TII/Menalco trade secrets for th e m s e lv e s . Plaintiffs allege as predicate acts mail and wire fraud prohibited by 18 U.S.C. § 1341 and § 1343. Plaintiffs contend Defendants used the mails and wires to make false re p re se n ta tio n s for the purpose of misappropriating and profiting from Plaintiffs' p ro p rie ta ry business information and trade secrets. In count two, Plaintiffs allege D e f e n d a n ts conspired to engage in this racketeering activity. B u c h a n moves for summary judgment on this claim, arguing Plaintiffs have f a ile d to produce evidence that Buchan agreed to join in a conspiracy or to commit p re d ic a te acts. Bone-Knell also moves for summary judgment, arguing he was not a p a rtic ip a n t in an enterprise, and he did not act in a directing capacity in any such enterprise. Bone-Knell also argues Plaintiffs have not shown that Bone-Knell agreed to join a c o n s p ira c y or to commit predicate acts. Plaintiffs respond that while Buchan references the Complaint, the evidence a d d u c e d during discovery demonstrates Buchan was a central figure in an associated-in-fact e n te rp ris e that included Buchan, Bone-Knell, CBData, SCTN, and Phoenix. Plaintiffs c o n te n d the facts demonstrate these co-conspirators agreed to form an enterprise to 22

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m isa p p ro p ria te Selektpoints, and they facilitated the commission of predicate acts using the m a il and wires, including misappropriating Plaintiffs' marketing materials and contracts for C B D a ta 's use, soliciting investors for CBData, and communicating about opportunities for C B D a ta . Plaintiffs also argue the evidence demonstrates Bone-Knell was a participant in th e enterprise-in-fact, and that he performed acts in support of the enterprise, including f ilin g a patent application in CBData's name for the same concept for which he previously h a d filed an application in Menalco's name, and communicated with the other alleged c o -c o n s p ira to rs about certain language in presentations and contracts. Plaintiffs also argue B o n e -K n e ll need not have directed activity to be liable under RICO, but that he nonetheless e n g a g e d in substantial activity, such as filing the patent application in CBData's name and ta k in g other steps to get the misappropriated trade secrets to market for CBData. Plaintiffs also move for summary judgment on their federal RICO claims, a rg u in g the evidence shows Defendants were involved in a scheme to defraud Plaintiffs out o f the Selektpoints concept. Plaintiffs argue Defendants participated in an association-inf a c t enterprise that was designed to misappropriate Plaintiffs' trade secrets and present them a s Defendants' own property. As for predicate acts, Plaintiffs contend Defendants c o m m itte d mail and wire fraud by using email to communicate regarding opportunities for C B D a ta and to make false representations to Plaintiffs regarding Defendants' progress on a n d intentions with respect to Selektpoints. Defendant Bone-Knell responds that Plaintiffs' evidence does not support P la in tif f s ' argument that Bone-Knell participated in any scheme to defraud Plaintiffs out of S e le k tp o in ts , and the evidence presented regarding Bone-Knell's participation is false. Defendant Buchan responds that Plaintiffs seek summary judgment on claims which o rd in a rily are not suitable for summary judgment, as they necessarily are fact intensive and in v o lv e questions of intent and state of mind. Further, Buchan disputes he was engaged in 23

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a n y scheme to defraud Plaintiffs. Rather, he was engaged in fulfilling Plaintiffs' request th a t he seek out potential purchasers or joint venture opportunities for the Selektpoints p ro g ra m , and he did so at Plaintiffs' request and on Plaintiffs' behalf. Defendants SCTN and Phoenix respond by arguing genuine issues of material f a c t remain regarding whether TII intended to sell Selektpoints, and directed Eddy, Koster, a n d Buchan to present them with proposals and/or arrange for Selektpoints to be marketed g lo b a lly via a new entity. Further, SCTN and Phoenix argue that even if TII could show B u c h a n , Eddy, Koster, and Bone-Knell conspired against TII, no evidence in the record s h o w s SCTN or Phoenix knew about or participated in the conspiracy. Finally, SCTN and P h o e n ix argue Plaintiffs have failed to demonstrate concrete financial loss. P u rs u a n t to 18 U.S.C. § 1962(c), it is unlawful "for any person employed by or a s s o c ia te d with any enterprise engaged in, or the activities of which affect, interstate or f o re ig n commerce, to conduct or participate, directly or indirectly, in the conduct of such e n te rp ris e 's affairs through a pattern of racketeering activity or collection of unlawful debt." RICO provides a civil cause of action for "[a]ny person injured in his business or property b y reason of a violation of section 1962." 18 U.S.C. § 1964(c). "To have standing under § 1964(c), a civil RICO plaintiff must show: (1) that his alleged harm qualifies as injury to h is business or property; and (2) that his harm was `by reason of' the RICO violation, which re q u ire s the plaintiff to establish proximate causation." Canyon County v. Syngenta Seeds, In c ., 519 F.3d 969, 972 (9th Cir. 2008). A plaintiff asserting injury to business or property m u s t show "concrete financial loss" resulting from "a harm to a specific business or p ro p e rty interest­a categorical inquiry typically determined by reference to state law." Id. at 9 7 5 (quotations omitted). T o prevail on a federal civil RICO claim, a plaintiff must demonstrate "(1) c o n d u c t (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as `p re d ic a te acts') (5) causing injury to plaintiff's `business or property.'" Living Designs, 24

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In c . v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (quotation o m itte d ). Pursuant to § 1962(d), it is unlawful to conspire to commit a violation of § 1962(c). To satisfy the first element, a defendant "must participate in the operation or m a n a g e m e n t of the enterprise itself." Reves v. Ernst & Young, 507 U.S. 170, 185 (1993). Conduct "requires an element of direction." Walter v. Drayson, 538 F.3d 1244, 1247 (9th C ir. 2008) (quotation omitted). The defendant need not be "upper management" to conduct th e enterprise's affairs, as an enterprise is "`operated' not just by upper management but a ls o by lower rung participants in the enterprise who are under the direction of upper m a n a g e m e n t." Reves, 507 U.S. at 184. However, simply providing services to the e n te rp ris e without an element of direction is insufficient. Walter, 538 F.3d at 1249. A n enterprise "includes any individual, partnership, corporation, association, or o th e r legal entity, and any union or group of individuals associated in fact although not a le g a l entity." 18 U.S.C. § 1961(4). A plaintiff pleads an enterprise through allegations of " a n ongoing organization, formal or informal," and by allegations that "the various a s s o c ia te s function as a continuing unit." Odom v. Microsoft Corp., 486 F.3d 541, 549 (9th C ir. 2007) (en banc) (quotation omitted). An organization is ongoing if it "is a vehicle for th e commission of two or more predicate crimes." Id. at 552 (quotation omitted). Allegations that the organization existed over a two-year timespan suffices to allege it is a c o n tin u in g unit. Id. Where the plaintiff alleges an associated-in-fact enterprise, the p la in tif f need not allege "any particular organizational structure, separate or otherwise." Id. a t 551. A plaintiff establishes a pattern of racketeering activity by showing the p a rtic ip a n ts in the enterprise committed at least two acts of racketeering. Id. at 552; 18 U .S .C . § 1961(5). To prove a pattern of racketeering activity, the plaintiff must show "that th e racketeering predicates are related, and that they amount to or pose a threat of continued 25

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c rim in a l activity." H.J. Inc. v. N.W. Bell Tel. Co., 492 U.S. 229, 239 (1989). Predicate acts a re related if they have similar "purposes, results, participants, victims, or methods of c o m m is sio n , or otherwise are interrelated by distinguishing characteristics and are not is o la te d events." Id. at 240 (quotation omitted). As to continuity, a plaintiff must show either a closed period of repeated conduct, o r past conduct that by its nature projects into the future with a threat of repetition. Id. at 2 4 1 . "Continuity does not require a showing that the defendants engaged in more than one `s c h e m e ' or `criminal episode.'" Medallion Television Enters., Inc. v. SelecTV of Cal., In c ., 833 F.2d 1360, 1363 (9th Cir. 1987). However, the circumstances in any particular c a s e may demonstrate the predicate acts do not amount to a threat of continuing activity. Id. Racketeering activity includes "any act or threat involving murder, kidnapping, g a m b lin g , arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a c o n tro lle d substance or listed chemical . . . which is chargeable under State law and p u n is h a b le by imprisonment for more than one year." 18 U.S.C. § 1961(1)(A). Racketeering activity also includes a variety of specified federal crimes, including mail and w ire fraud. Id. § 1961(1)(B). To state the elements of wire or mail fraud, the plaintiff must a lle g e (1) the defendants formed a scheme or artifice to defraud; (2) the defendants used the m a ils or wires in furtherance of the scheme; and (3) the defendants acted with the specific in te n t to deceive or defraud. Miller v. Yokohama Tire Corp., 358 F.3d 616, 620 (9th Cir. 2 0 0 4 ); United States v. Manion, 339 F.3d 1153, 1156 (9th Cir. 2003). The mails or wires a re used in furtherance of a scheme even if use of the mails or wires is not an "essential e le m e n t" of the fraudulent the scheme, so long as it is "a step in the plot." United States v. S h ip s e y, 363 F.3d 962, 971 (9th Cir. 2004) (quotation omitted). Finally, to establish causation, the plaintiff must allege he was injured "by reason o f " the defendant's alleged racketeering activity. Living Designs, Inc., 431 F.3d at 362-63. The plaintiff therefore must allege the defendant's conduct proximately caused the 26

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p la in tif f 's injury. Poulos v. Caesars World, Inc., 379 F.3d 654, 666 (9th Cir. 2004). 1 . Buchan's and Bone-Knell's Motions for Summary Judgment T h e Court will grant Buchan's and Bone-Knell's motions for summary judgment o n these claims. Plaintiffs have failed to present evidence raising a genuine issue of m a te ria l fact that Defendants' alleged predicate acts satisfy the continuity requirement. Defendants' conduct involved a single alleged fraud against a single victim. Upon D e f e n d a n ts successfully appropriating Selektpoints for their own benefit, the alleged s c h e m e would be complete. Plaintiffs present no evidence Defendants intended to defraud a n y other companies out of intellectual property or otherwise were committing or th re a te n in g to commit other fraudulent acts. Thus, "although [Plaintiffs] allege[] a number o f `acts,' [Defendants'] collective conduct is in a sense a single episode having the singular p u rp o s e of [misappropriating Selektpoints], rather than a series of separate, related acts." Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1535 (9th Cir. 1992) (holding allegations that th e plaintiff's former employer took retaliatory actions against him for being a w h is tle b lo w e r did not state a pattern of racketeering activity); see also Medallion Television E n te rs ., Inc., 833 F.2d at 1363-64 (holding threat of continuing illegal activity was lacking w h e re the case involved a single fraud with a single victim based on allegations that the d e f e n d a n t attempted to induce the plaintiff to form a joint venture to obtain broadcast rig h ts ). M o re o v e r, Plaintiffs have failed to show injury or damages with admissible e v id e n c e . In their opposition, Plaintiffs cite only to their expert report in support of their a rg u m e n t that they have established harm to TII's business. (Pls.' Opp'n to Buchan at 6; P ls .' Opp'n to Bone-Knell's Mot. Summ. J. at 7.) The Court will not consider the expert re p o rt, as it is hearsay. Plaintiffs therefore have failed to present admissible evidence ra isin g a genuine issue of material fact as to injury or damages for this claim. Because P la in tif f s had reasonable notice that the sufficiency of their claim was at issue based on 27

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D e f e n d a n ts Buchan and Bone-Knell challenging the claim on these bases, the Court sua s p o n te will grant summary judgment in favor of Defendants SCTN and Phoenix on this c la im as well. See Oluwa v. Gomez, 133 F.3d 1237, 1239 (9th Cir. 1998). 2. Plaintiffs' Motion for Summary Judgment B e c a u s e the Court will grant Defendants' motion for summary judgment on these c la im s , the Court will deny Plaintiffs' motion for summary judgment. Further, even if the C o u rt were not granting Defendants' motion for summary judgment as to these claims, the C o u rt still would deny Plaintiffs' motion. Defendant Buchan denies under oath he p a rtic ip a te d in any scheme to defraud Plaintiffs of Selektpoints. He avers that he worked at a ll times in Plaintiffs' interest and at Plaintiffs' direction to obtain offers to purchase or jo in t venture opportunities for Selektpoints. Because Buchan's intent is an essential e le m e n t of the alleged predicate acts of mail and wire fraud, a genuine issue of material fact re m a in s for trial, and Plaintiffs are not entitled to summary judgment as to Defendant B uchan. A s for Defendant Bone-Knell, Buchan's denial that he participated in a c o n s p ira c y to steal Selektpoints from Plaintiffs raises a genuine issue of material fact for B o n e -K n e ll as well. As Plaintiffs have framed the facts, Buchan was the key individual in th e alleged conspiracy, and thus his denial of any such scheme to defraud raises a genuine is su e of material fact regarding Bone-Knell's participation in any such scheme. Additionally, many of the facts which Plaintiffs cite to support their federal R IC O claims against Bone-Knell are not supported by the evidence. Plaintiffs assert they p a id Bone-Knell's "bills" believing he was providing services to Plaintiffs when he was n o t. However, the evidence shows Bone-Knell submitted only one bill to Plaintiffs for f ilin g the patent application in the United Kingdom, which he filed under Plaintiff M e n a lc o 's name. Additionally, while Plaintiffs contend Bone-Knell filed the patent a p p lic a tio n listing Holmes and Buchan as the inventors, the evidence Plaintiffs cite consists 28

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o f an email string between Buchan and Bone-Knell discussing in whose name the patent s h o u ld be filed. The actual patent application Bone-Knell filed is in Menalco's name and d o e s not list Buchan and Holmes as the inventors. Plaintiffs also contend Bone-Knell filed a patent application in the United States listing Buchan and Holmes as inventors. However, th e evidence cited again consists only of an email string discussing a possible application in th e United States. Bone-Knell denies he ever made such a filing, and Plaintiffs present no e v id e n c e to the contrary. Moreover, the email string identifies Menalco as the "proprietor," th u s raising an issue of fact as to whether Bone-Knell was acting in Plaintiffs' interest in a n y efforts to obtain a patent in the United States, rather than in furtherance of a conspiracy to deprive Plaintiffs of Selektpoints. A s to Defendants SCTN/Phoenix, a genuine issue of material fact remains re g a rd in g their participation in any alleged scheme to defraud. Buchan denies any such s c h e m e to defraud existed. Radivojsa, SCTN/Phoenix's principal, testified he believed T II/M e n a lc o knew about and approved of the efforts of Buchan, Koster, and Eddy to p re p a re purchase or joint venture proposals for Selektpoints. Further, Radivojsa and K o ra k ia n itis both testified that Radivojsa would not move forward with a deal involving P h o e n ix and CBData without TII's participation, as reflected in the email string discussing a potential MOU between CBData and Phoenix. Radivojsa also testified he never had any re a s o n to believe that Buchan was not acting on Selektpoints' behalf. G e n u in e issues of material fact remain regarding whether Defendants engaged in a n y pred