Software Rights Archive, LLC v. Google Inc. et al

Filing 151

RESPONSE in Opposition re 147 SEALED MOTION for Certification of Order for Interlocutory Appeal, or in the Alternative, for Reconsideration filed by Software Rights Archive, LLC. (Attachments: # 1 Text of Proposed Order Order Denying)(Kaplan, Lee)

Software Rights Archive, LLC v. Google Inc. et al

Doc. 151

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION

SOFTWARE RIGHTS ARCHIVE, LLC §

v. §

Plaintiff §
§

§

Civil Action No. 2:07-cv-511 (CE)
§

GOOGLE INC., YAHOO! INC., §
lAC SEARCH & MEDIA, INC., AOL LLC, §

and L YCOS, INC. § § Defendants §

JURY TRIAL DEMANDED

SOFTWARE RIGHTS ARCHIVE, LLC'S OPPOSITION TO GOOGLE INC., AOL LLC, AND YAHOO! INC.'S MOTION FOR CERTIFICATION OF ORDER FOR INTERLOCUTORY APPEAL, OR IN THE ALTERNATIVE, FOR RECONSIDERATION

Dockets.Justia.com

TABLE OF CONTENTS

TABLE OF CONTENTS................................................................................................................ ii
TABLE OF AUTHORITIES ......................................................................................................... iii

i. Defendants' Motion for Certification Should Be Denied ........................................1
A. The Order Does Not Involve a Pure Question of

Law.................................2

B. The Order Does Not Involve a Controllng Question of

Law. .............................................................................................................3

C. The Order Is Not Subject to a Substantial Ground for
Difference of Opinion. .................................................................................4
D. Certification Wil Not Materially Advance the Termination
of

the Litigation............................................................................................6

II. Defendants' Motion for Reconsideration Should Be Denied. .................................7
A. Defendants' Motion Identifies No "Manifest Error of

Law."......................7

B. Defendants' Motion Impermissibly Rehashes Previous

Arguments. .................................................................................................1 0

11

TABLE OF AUTHORITIES
Page(s)
CASES
Ahrenholz v. Bd. of

Trs. of the Univ. of Il., 219 F.3d 674 (7th Cir. 2000) .................................................................................................1, 2

Alberto v. Diversifed Group, Inc., 55 F.3d 201 (5th Cir. 1995) .......................................................................................................8
ASARCO LLC v. Ams. Mining Corp.,

396 B.R. 278 (S.D. Tex. 2008) ..............................................................................................8, 9
BASF Corp. v. POSM II Props. P'ship, L.P., 2009 WL 5222721 (DeL. Ch. Mar. 3,2009)...............................................................................8

Bell Helicopter Textron, Inc. v. C&C Helicopter Sales, Inc.,
295 F. Supp. 2d 400 (D. DeL. 2002)...........................................................................................8

Cabrallo-Seda v. Mun. of Hormigueros,

395 F.3d 7 (1st Cir. 2005) ..........................................................................................................5
California Public Employees' Retirement System v. Worldcom, Inc., 368 F.3d 86 (2d Cir. 2004).....................................................................................................3,4
Crouch v. J C. Penney Corp., Inc.,

564 F. Supp. 2d 636 (E.D. Tex. 2008).......................................................................................7
Dupree v. Kaye,

2008 WL 294532 (N.D. Tex. Feb. 4, 2008)...............................................................................5
EBG Holdings LLC v. Vredezicht's Gravenhage 109 B. V, 2008 WL 4057745 (DeL. Ch. Sept. 2, 2008) ..............................................................................8

Fitzgerald v. Cantor,
1998 WL 842316 (DeL. Ch. Nov. 10,1998) ..............................................................................9

Hallburton Energy Servs., Inc. v. NL Indus., 2007 WL 268492 (S.D. Tex. Jan. 26, 2007) ..........................................................................5, 6
Harco Nat 'i Ins. Co. v. Green Farms, Inc.,

1989 WL 110537 (DeL. Ch. Sept. 19, 1989) ..............................................................................9

In re Enron Corp., 316 B.R. 767 (S.D.N.Y. 2004)...................................................................................................4

In re Flor, 79 F.3d 281 (2d Cir. 1996).........................................................................................................5
iii

In re Foxmeyer Corp., 290 B.R. 229 (Bank. D. DeL. 2003) ........................................................................................10
In re M&L Bus. Mach. Co., 75 F.3d 586 (10th Cir. 1996) .....................................................................................................6

Insituform Techs., Inc. v. CAT Contracting, Inc., 385 F.3d 1360 (Fed. Cir. 2004)..................................................................................................2
Litton Sys., Inc. v. Raytheon Co., 1992 WL 276681 (Fed. Cir. Aug. 4, 1992)................................................................................1

Mabon, Nugent & Co. v. Tex. Am. Energy Corp.,
1988 WL 5492 (DeL. Ch. Jan. 27, 1988)....................................................................................9

McFarlin v. Conseco Servs., LLC 381 F.3d 1251 (lIth Cir. 2004) .................................................................................................3
Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical,

2004 WL 415251 (DeL. Ch. Mar. 4, 2004).................................................................................9
Midland Interiors, Inc. v. Burleigh, 2006 WL 3783476 (DeL. Ch. Dec. 19,2006).............................................................................9

Mobil Oil Corp. v. Linear Films, Inc.,
718 F. Supp. 260 (D. DeL. 1989)................................................................................................8

Natl Asbestos Workers Med. Fund v. Philp Morris, Inc., 71 F. Supp. 2d 139 (E.D.N.Y. 1999) .....................................................................................1, 2
Parcel Tankers, Inc. v. Formosa Plastics Corp.,

764 F.2d 1153 (5th Cir. 1985) ...................................................................................................4

Pauley Petroleum, Inc. v. Continental Oil Co.,
239 A.2d 629 (DeL. 1968) ................................................................................................passim

Pereira v. Cogan,

265 B.R. 32 (S.D.N.Y. 2001).....................................................................................................5

Pittway Corp. v. Fyrnetics, Inc., 1993 WL 452621 (Fed. Cir. July 30,1993)...............................................................................2
PYR Energy Corp. v. Samson Res. Co., 2007 WL 858803 (E.D. Tex. Mar. 16,2007) ............................................................................1
Raber v. Pittway Corp. , 1994 WL 18499 (Fed. Cir. Jan. 13, 1994) .................................................................................2

iv

SEC v. Us. Envtl., 155 F.3d 107 (2d Cir. 1998).......................................................................................................7
Smith v. AET Inc., Ltd., 2007 WL 1644060 (S.D. Tex. June 4, 2007) .............................................................................2

Sprint Nextel Corp. v. iPCS, Inc.,
2008 WL 2737409 (DeL. Ch. July 14,2008)..........................................................................2,9
Stoffels v. SBC Commcn 's, Inc.,

572 F. Supp. 2d 809 (W.D. Tex. 2008)......................................................................................2
Weber v. Us.,

484 F.3d 154 (2d Cir. 2007).......................................................................................................5
Westport Ins. Corp. v. Stengel, 571 F. Supp. 2d 737 (E.D. Tex. 2005).................................................................................7, 10
Zubik v. Zubik, 384 F.2d 267 (3d Cir. 1967).......................................................................................................8
STATUTES

28 U.S.C. § 1292(b) ...............................................................................................................passim

v

Defendants' motion for certification should be denied for multiple independent reasons:

. The Cour's order does not involve a pure question of law. Alter ego is not an issue that can be decided quickly and without having to study the record, but instead is a
fact-intensive inquiry that in this case wil require the circuit court to delve into

affidavits, SEC fiings, deposition transcripts, tax fiings, and other documents.
. The Court's order does not involve a controllng question of law. Cours consistently

hold this requirement unsatisfied where even one alternative basis exists for
potentially upholding the district cour's ruling. This Cour's order rests on just one
of many alternative grounds.
. The Court's order is not subject to a substantial ground for difference of opinion. It
presents no difficult question of first impression, but instead merely, and

impermissibly, complains that the parties disagree and that the court ruled incorrectly.
. Certification would not materially advance the ultimate termination of the litigation.

At best, the Federal Circuit wil remand this Court's order for resolution of whether something like fraud occured and whether standing exists under one of the many alternative theories originally unaddressed by this Cour.
Defendants' motion for reconsideration should also be denied:
. Defendants identify no manifest error of law. This Court's order was correctly

decided, and Pauley, on which this Court relied, is alive and well and comports
perfectly with the cases Defendants cite.
. Defendants impermissibly rehash arguments asserted in their original briefing. Their motion is an improper effort to get a fourth bite at the apple.
i. DEFENDANTS' MOTION FOR CERTIFICATION SHOULD BE DENIED

Motions for certification may be granted only where four requirements are satisfied: "(1)

there must be a question of law, (2) it must be controllng, (3) it must be contestable, and (4) its resolution must promise to speed up the litigation."i Defendants have not satisfied their burden
to meet any of

these requirements-much less all four.2 Certification should be denied.

the Univ. of Ill., 219 F.3d 674,675 (7th Cir. 2000) (Posner, C.J.); see Litton Sys., Inc. v. Trs. of Raytheon Co., 1992 WL 276681, at *2 (Fed. Cir. Aug. 4, 1992) (stating the same requirements in a three-part test: (1) the order appealed from involves a controllng question of law; (2) there is substantial ground for difference of
1 Ahrenholz v. Bd. of

opinion as to that question; and (3) an immediate appeal may materially advance the ultimate termination of the litigation); PYR Energy Corp. v. Samson Res. Co., 2007 WL 858803, at *1 (B.D. Tex. Mar. 16,2007) (same).

2 In fact, if any requirements even arguably fails-and here they all clearly fail--ertification would have to be denied, because interlocutory certifications under § 1292(b) are "not favored," and the statute is to be "strictly construed." Complaint of Ingram Towing Co., 59 F.3d 513, 515 (5th Cir. 1995). Moreover, this Cour has discretion to deny certification even where all statutory requirements are satisfied. Natl Asbestos Workers Med.

A. The Order Does Not Involve a Pure Question of

Law.

Certification of an order is appropriate only if it "turned on a pure question of law,
something the court of appeals could decide quickly and cleanly without having to study the
record." Ahrenholz, 219 F.3d at 677.3 It should be denied where the issues "are heavily factbased and necessarily involve a review of

the factual record." Smith v. AET Inc., Ltd., 2007 WL

1644060, at *6 (S.D. Tex. June 4, 2007) (denying certification).4

The Court's order here rests on the alter ego doctrine, which is undeniably fact-specific:
"(R)esolution of

the alter ego issue is heavily fact-specific and, as such, is peculiarly within the

province of the trial court." Insituform Techs., Inc. v. CAT Contracting, Inc., 385 F.3d 1360,
1380 (Fed. Cir. 2004) (applying Fifth Circuit law); see Sprint Nextel Corp. v. iPCS, Inc., 2008
WL 2737409, at * 11 (DeL. Ch. July 14, 2008) ("Disregard of the corporate entity. . . is a fact-

intensive inquiry." (internal quotation marks and modifications omitted)) (applying Delaware
law).5 In fact, the Court's reasoning involved reciting nearly four full pages of

the specific facts

of this case, such as the precise relationship between Site/Tech and Deltapoint and the specific
representations made by Deltapoint to Egger and others. Furthermore, though Defendants try to

put an abstract-sounding spin on the question to be certified, their own formulation of that
question reveals the failure of this requirement: "whether standing . . . is satisfied . . . absent a

showing that . . . (the corporate form) did in fact perpetrate a fraud or something like fraud"
Fund v. Philp Morris, Inc., 71 F. Supp. 2d 139, 166 (E.D.N.Y. 1999). Such an exercise of discretion is nonreviewable. Id. 3 Accord Pittway Corp. v. Fyrnetics, Inc., 1993 WL 452621, at *1 (Fed. Cir. July 30, 1993) (declining interlocutory
jurisdiction); Stoffels v. SBC Commcn 's, Inc., 572 F. Supp. 2d 809,811 (W.D. Tex. 2008) (denying certification).

4 See Raber v. Pittway Corp., 1994 WL 18499, at *2 (Fed. Cir. Jan. 13, 1994) (denying certification where "(t)he

certified order. . . concerns the law as applied to the specific facts of this case"); Stoffels, 572 F. Supp. 2d at 811 ("(P)ermissive interlocutory appeals are not proper for determinations that involve applications oflaw to fact."). 5 Defendants' own motion acknowledges that alter ego is an evidentiary inquiry; it states that "discovery sought by

(pending) motions may reveal new evidence relevant to this motion" and purports to "reserve the right to
supplement this memorandum (including with any newly discovered evidence)." (Defs.' Mot. at 2.)

2

turns on a hotly disputed fact issue in this case-whether Deltapoint and Site/Tech perpetrated
"something like fraud" on Daniel Egger. (Defs.' Mot. at 1.) Thus, the inescapable fact is that, if

this order is certified, the circuit court wil have to engage in a fact-intensive alter ego analysis,

delving into the record-affdavits, deposition transcripts, tax records, SEC fiings, and all-to
sort through all the fact issues, just as this Court did. This is the opposite of what certification is

about: "1292(b) appeals were intended, and should be reserved, for situations in which the cour

of appeals can rule on a pure, controlling question of law without having to delve beyond the

surface of the record in order to determine the facts." McFarlin v. Conseco Servs., LLC 381
F.3d 1251, 1259 (lIth Cir. 2004). Therefore, certification should be denied.

B. The Order Does Not Involve a Controllng Question of

Law.

Certification is inappropriate for the further reason that this Court's order does not

involve "a controllng question oflaw." 28 U.S.c. § 1292(b). The case law is clear that an order

is not controllng if the district court could have based it on alternative, unaddressed grounds.
For example, in California Public Employees' Retirement System v. Worldcom, Inc., 368 F.3d 86

(2d Cir. 2004), the district court held that the court possessed jurisdiction over plaintiffs' claims

because those claims "related to" certain third parties' contribution claims pending against the
defendant in bankuptcy. Id. at 95. Additional grounds for finding

jurisdiction were advanced to

the district court, id. at 92, but the court declined to address them. Id. at 95. Both the district
court and the Second Circuit refused to certify the order, because, in the Second Circuit's words:

Having isolated a single basis for jurisdiction-i.e., certain (third parties')
contribution claims against the (defendant)-the District Court did not decide

whether the Directors' indemnification claims against the (defendant) or any other
potential claims supported 'related to' jurisdiction. Because at least one
alternative basis for 'related to' jurisdiction may exist-i.e., the Directors'

indemnification claims against the estate-we are not convinced that the (plaintiffs) have raised a 'controllng question' that should be reviewed on an
interlocutory basis.

3

Id. Likewise, in Parcel Tankers, Inc. v. Formosa Plastics Corp., 764 F.2d 1153 (5th Cir. 1985),

the district court determined that it had personal jurisdiction over the defendant because the
defendant owned cargo located at the port of Houston that was the subject of a writ of

attachment. Id. at 1154. The defendant sought certification, arguing that the writ of attachment

was issued unconstitutionally. Id. The Fifth Circuit rejected certification, because potential
alternative theories for personal jurisdiction rendered the question not controlling:

Even were we to hold Rule B unconstitutional, as (Defendant) urges, a factual
dispute would remain as to whether the district court's in personam jurisdiction over (Defendant) could be sustained on the basis of (Defendant's) continuing

contacts with the relevant jurisdiction. . . . Thus, even a holding on our part that jurisdiction could not rest on Rule B would not result in dismissal of the suit. At best, it would only vacate the writ of attachment.
Id. at 1155 n.i.6
Here, as this Court recognized, numerous alternative grounds potentially support this

Court's ruling: "SRA's argument sets forth a number of legal theories which arguably vest title
of

the patents-in-suit with SRA, thus conferring standing." (Order at 4.) Yet this Court's order

rested on just one-alter ego-and expressly declined to address the others: "Because the court

finds in favor of SRA on the alter ego issue, the court wil forgo analysis of standing under the

remaining common law theories." (Order at 5.) Because numerous alternative, unaddressed
grounds remain to potentially support this Court's order, the question presented for interlocutory
review is not controlling, and certification should be denied.

c. The Order Is Not Subject to a Substantial Ground for Difference of Opinion.
Certification should be denied for the further reason that the question presented here is

not subject to a "substantial ground for difference of opinion." 18 U.S.C. § 1292(b). Very few
6 See also In re Enron Corp., 316 B.R. 767, 772 (S.D.N.Y. 2004) (denying certification of a bankptcy court order
where there were two alternative bases urged in support of

the order, but the bankuptcy court had rested its holding

on just one; "If this Court were to reverse the Stay Order, the bankrptcy judge would be required to consider the the Stay Order therefore does not involve a controlling question oflaw."). alternative basis for it. The appeal of

4

questions satisfy this requirement. Questions that are raised for certification merely because
"counsel disagrees on applicable precedent"? or because a party "claim(s) that a district court has
ruled incorrectly" do not qualify. 8 In fact, even "a question of first impression, standing alone, is

insuffcient to demonstrate a substantial ground for difference of opinion.,,9 Perhaps most
tellingly, even "some level of disagreement among cours does not (necessarily) mean that the

standards of § 1292(b) are satisfied."io Rather, certification is reserved only for "diffcult and
pivotal questions of law not settled by controllng authority."ll It is proper only in the

exceptional case where "a trial court rules in a manner which appears contrary to the rulings of
all Courts of Appeals which have reached the issue, if the circuits are in dispute on the question

and the Court of Appeals of the circuit has not spoken on the point, if complicated questions
arise under foreign law, or if novel and diffcult questions of

first impression are presented."i2

This is not one of

those exceptional cases. This Court's order did not violate any circuit's

precedent, there is no circuit split that the Federal Circuit must address, and no complex foreign
law is implicated here. Nor is the question here-what specific fraud-like facts merit an alter

ego finding under Delaware law-a "novel and diffcult question of first impression." There are
literally hundreds of cases from around the country analyzing alter ego under Delaware law. The
case on which this Court's order relied-Pauley Petroleum, Inc. v. Continental Oil Co., 239

A.2d 629 (DeL. 1968)-has itself been cited dozens of times in connection with such analyses.

7 Hallburton Energy Servs., Inc. v. NL Indus., 2007 WL 268492, at *11 (S.D. Tex. Jan. 26, 2007).

8 Dupree v. Kaye, 2008 WL 294532, at *3 (N.D. Tex. Feb. 4,2008); see also Weber v. u.s., 484 F.3d 154, 159 n.3
(2d Cir. 2007) ("Congress did not intend 28 U.S.C. § 1292(b) to serve an error-correction function."). 9 In re Flor, 79 F.3d 281,284 (2d Cir. 1996) (internal quotation marks omitted).

10 Pereira v. Cogan, 265 B.R. 32, 35 (S.D.N.Y. 2001).
11 Cabrallo-Seda v. Mun. of Hormigueros, 395 F.3d 7, 9 (1st Cir. 2005).
12 Dupree, 2008 WL 294532, at *3 (quoting 24 Am. Jur. 2d Appellate Review § 123 (2007)).

5

Instead, this request is a run-of-the-mil complaint that the paries "disagreer) on

applicable precedent" and that the "district court has ruled incorrectly." Specifically, Defendants
complain that the Court's order "apparently relied on Pauley suggesting that any apparent

injustice-even absent fraud or its equivalents-could justify an alter ego finding," which
"interpretation" Defendants contend "conflcts with subsequent Delaware cases." (Defs.' Mot. at

6.) To begin, since SRA contended that "something like fraud" was present, and since the
Court's order is consistent with such a finding, Defendants' argument that Pauley is no longer

good law-in addition to being wrong-is somewhat beside the point. But in any event,
Defendants' disagreement with this Court's "interpretation" of the controllng precedents does
not demonstrate "a substantial ground for difference of opinion" as required by § 1292(b). 13 For

this third independent reason, Defendants' motion should be denied.

D. Certification Wil Not Materially Advance the Termination of the Litigation.
Fourth, certification is inappropriate because Defendants have not shown that "an
immediate appeal from the order may materially advance the ultimate termination of the

litigation." 28 U.S.C. § 1292(b). Defendants claim that this Cour erred, because Delaware alter
ego law "requires the purposeful commission of fraud or something like fraud." (Defs.' Mot. at

5.) Defendants are wrong, as explained below. But, even if the Federal Circuit were to agree
with Defendants, it would likely remand the issue back to this Court. Stil remaining to be

resolved would be the fact issue of whether this Court's order was proper because "fraud or
something like fraud" was present, i4 and the question of whether standing should be sustained

13 See, e.g., Hallburton Energy Servs., Inc., 2007 WL 268492, at *11 ("(S)imply because a court is the first to rule

on a question or counsel disagrees on applicable precedent does not qualify the issue as one over which there is substantial disagreement." (internal quotation marks omitted)). 14 See, e.g., In re M&L Bus. Mach. Co., 75 F.3d 586, 591-92 (lOth Cir. 1996) (after reversing district court
determination that a new limitations period began to run again following the conversion of a Chapter 11 case to a
6

under one or more of the many independent legal doctrines originally unaddressed by this
Court.

15 Accordingly, Defendants' claim that certification would advance the termination of this

case "because a ruling that SRA has no standing would terminate all of SRA's claims" is grossly
misleading. (Defs.' Mot. at 1.) Because all four independent requirements of § 1292(b) fail,

Defendants' motion should be denied.
II. DEFENDANTS' MOTION FOR RECONSIDERATION SHOULD BE DENIED.

It is well-settled: Reconsideration is an "extraordinary" remedy to "be used sparingly.,,16
"Motions to reconsider. . . serve a very limited purose: to permit a pary to correct manifest

errors of law or fact, or to present newly discovered evidence."I? "Mere disagreement with a
district court's order does not warrant reconsideration of that order. A party should not restate,
recycle, or rehash arguments that were previously made.,,18 Defendants' motion disregards all

these principles and seeks an unjustified fourth bite at the apple.19 Moreover, this Cour's order
was correctly decided in the first instance. Therefore, reconsideration should be denied.
A. Defendants' Motion Identifies No "Manifest Error of Law."

Defendants' motion identifies no "manifest error oflaw." It complains that this Court's

order "relied centrally on Pauley"-a longstanding Delaware Supreme Court case-but then
fails entirely to negate Pauley's continuing validity. (Defs.' Mot. at 8.) Defendants cite not one

Chapter 7 case, remanding to the district court for determination as to whether the limitations period was equitably
tolled under the facts of

the case).

15 See SEC v. u.s. Envtl., 155 F.3d 107, 113 (2d Cir. 1998) (after reversing on interlocutory appeal district court
order that dismissed SEC complaint on sole ground that the SEC had failed to allege that defendant was a primary violator, refusing to consider defendant's argument that complaint failed to allege fraud with particularity because "the district court explicitly declined to rule upon that issue"). 16 See Crouch v. J.c. Penney Corp., Inc., 564 F. Supp. 2d 636,640 (E.D. Tex. 2008).
17 Westport Ins. Corp. v. Stengel, 571 F. Supp. 2d 737, 738 (E.D. Tex. 2005) (internal quotation marks omitted).
18 Id. (internal quotation marks and citations omitted).
19 In contesting standing, Defendants have already fied (l) a motion to dismiss on July 16, 2008 (l2 pages), (2) a

reply in further support on November 4,2008 (30 pages), and (3) a sur-reply on January 16,2009 (5 pages).

7

case that even remotely disagrees with Pauley. Instead, ironically, they rely on several cases that

actually affirm Pauley's teaching.2° In point of fact, Pauley is alive and well, as is its
longstanding and oft-cited principle that piercing the corporate veil "may be done only in the
interest of justice, when such matters as fraud, contravention of law or contract, public wrong, or
where equitable consideration among members of

the corporation require it, are involved.,,21 As

recently as three months ago, Vice Chancellor Strine cited Pauley and quoted that very principle
in BASF Corp. v. POSM II Props. P'ship, L.P., 2009 WL 5222721, at *8 n.50 (DeL. Ch. Mar. 3,

2009). Other courts from Delaware and around the country-including the Fifth Circuit and the
Southern District of Texas-have consistently done the same.22
Indeed, it is Defendants' strained reading of

Delaware alter ego law that misses the mark.

According to Defendants, the ironclad rule over all Delaware alter ego law is this: The corporate

veil may be pierced only in the narrow instance where "the corporate form (was) established or
operated for the purpose of defrauding and. . . perpetrated a fraud or something like fraud."

(Defs.' Mot. at 8.) Delaware law rejects this stilted approach: "(T)he legal test for (disregarding
the corporate form) cannot be reduced to a single formula that is neither over nor under-inclusive
. . . . (T)he cases inevitably tend to evaluate the specific facts with a standard of 'fraud' or

20 See, e.g., Zubik v. Zubik, 384 F.2d 267, 272 (3d Cir. 1967) ("(T)he appropriate occasion for disregarding the

corporate existence occurs when the court must prevent fraud, ilegality, or injustice, or when recognition of the corporate entity would defeat public policy or shield someone from liability for a crime."); Mobil Oil Corp. v.
Linear Films, Inc., 718 F. Supp. 260, 268 (D. DeL. 1989) ("Fraud is frequently cited as a basis on which to pierce the corporate veil, but it is not the only one: It may be done only in the interest of justice, when such matters as fraud, contravention of law or contract, public wrong, or where equitable considerations are involved." (internal quotation marks, ellipses, and modifications omitted)).
2\ Pauley, 239 A.2d at 633.

22 See, e.g., Alberto v. Diversifed Group, Inc., 55 F.3d 201, 206 n.19 (5th Cir. 1995); EBG Holdings LLC v.
Vredezichts Gravenhage 109 B. v., 2008 WL 4057745, at *11 (DeL. Ch. Sept. 2, 2008); ASARCO LLC v. Ams. Mining Corp., 396 B.R. 278, 320 (S.D. Tex. 2008); Bell Helicopter Textron, Inc. v. C&C Helicopter Sales, Inc., 295
F. Supp. 2d 400,407-08 (D. DeL. 2002).

8

'misuse' or some other general term of reproach in mind.,,23 In fact, Delaware law explicitly
holds that fraud, while often suffcient, is not the only type of injustice to give rise to veil-

piercing: "Fraud is frequently cited as a basis on which to pierce the corporate veil, but it is not

the only one.,,24 Rather, the inquiry is a much more flexible one, encompassing both "fraud"
specifically and "inequity" and "injustice" more generally?5

In fact, even the cases on which Defendants principally rely-Crosse and Wallace-do
not support Defendants' rigid principle. Rather, they stand in harmony with Pauley and with this

Court's order. Wallace states that "(p)iercing the corporate veil under the alter ego theory

requires that the corporate structure cause fraud or similar injustice.,,26 This in no way
contradicts-but rather affirms-Pauley's teaching that alter ego requires a showing of injustice,

one non-exclusive example of which is fraud. It also does not contradict this Court's order,
which held that "the equities in favor of preventing injustice and contravention of contract

strongly demand a piercing of the corporate veiL." (Order at 11-12.) It scarcely supports
Defendants' rule, which would require actual "defrauding." The case law requires "fraud or
similar injustice"-not "fraud or fraud."

23 Midland Interiors, Inc. v. Burleigh, 2006 WL 3783476, at *3 (DeL. Ch. Dec. 19,2006) (internal quotation marks
omitted). 24 Mabon, Nugent & Co. v. Tex. Am. Energy Corp., 1988 WL 5492, at *3 (DeL. Ch. Jan. 27, 1988); see Harco Nat'!

Ins. Co. v. Green Farms, Inc., 1989 WL 110537, at *4 (DeL. Ch. Sept. 19, 1989) ("Fraud has traditionally been suffcient reason to pierce the corporate veiL. Other grounds also exist."). 25 See, e.g., Sprint, 2008 WL 2737409, at *10 ("Under the alter ego or piercing the corporate veil doctrine, cours

wil ignore the corporate boundaries between parent and subsidiary if fraud or inequity is shown." (internal
quotation marks omitted)); Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical, 2004 WL 415251, at *7 (DeL. Ch. Mar. 4, 2004) ("For this Court to pierce the corporate veil. . . , Medi-Tec must prove that some 'fraud or injustice' the corporate form."); Fitzgeraldv. Cantor, 1998 WL 842316, at *2 (DeL. would be perpetrated through misuse of

the corporate form. . . under the alter-ego theory only in the exceptional case where the complainant can show fraud, injustice or inequity in the use of the corporate form."); ASARCO, 396 B.R. at 320 ("(F)raud is not required," but rather, "an inherent trait of Delaware's alter-ego
Ch. Nov. 10, 1998) ("This Court wil ignore the sanctuary of

theory is injustice or unfairess.").
26 Wallace, 752 A.2d at 1184 (internal quotation marks omitted).

9

In any event, here "the corporate form was operated for something like fraud." As this
Court found, even if

the patents belonged to Site/Tech, Deltapoint explicitly assured Egger that it

possessed "good and marketable title to the Purchased Assets," and in reliance thereon, "Egger

paid at least $80,000 of the $100,000 due under the assignment for the patents." (Order at 11.)
For Deltapoint to have shielded the patents in its shell subsidiary Site/Tech, even while

representing otherwise to Egger and taking Egger's money, certainly constitutes "operating the
corporate form for something like fraud.,,27 Therefore, Defendants' motion fails.28
B. Defendants' Motion Impermissibly Rehashes Previous Arguments.

Defendants' motion also improperly "rehash(es) arguments that were previously made.,,29

Defendants argue that "Delaware alter ego case law requires proof that the corporate form was

established or operated for the purpose of defrauding and that it in fact perpetrated a fraud or
something like fraud. . . . No one contends that Deltapoint and Site/Tech's corporate relationship

was established or intentionally operated to avoid liability for a transaction with Egger." (Defs.'

Mot. at 10.) Defendants' argument in their reply brief seven months ago is nearly identical:
"Under Delaware law, the alter ego doctrine applies only where a corporation uses its alleged
alter ego to perpetrate 'fraud or similar injustice.' . .. Here, there is no evidence that Site Tech

(i.e., Deltapoint) and Site/Tech intentionally used their corporate structure to defraud Egger."
(Defs.' Reply

at 17.) Defendants also relied on the same case law and made the same points as

here. In short, Defendants' motion merely seeks a fourth bite at the apple. It should be denied.

27 See In re Foxmeyer Corp., 290 B.R. 229, 241 (Bank. D. DeL. 2003) ("(U)nder Delaware law, it is not necessar in
an action . . . to pierce a corporate veil () to demonstrate that the defendant knew or believed that his

misrepresentation was false. . . ."). 28 In a footnote, Defendants point out that, in one place amidst a litany of factual recitations in its order, this Court

accidentally wrote "Site/Tech" instead of "Site Tech" or "Deltapoint." This minor error hardly constitutes a
"manifest error of

fact." Defendants claim no "newly discovered evidence," and indeed, none exists.

29 Westport, 571 F. Supp. 2d at 738.

10

Respectfully submitted,

Lee L. Kaplan
LEAD

ATTORNEY

State Bar No. 11094400
SMYSER KAPLAN & VESELKA, L.L.P.

700 Louisiana, Suite 2300 Houston, Texas 77002 [phone]
[phone] (fax)

lkaplan~skv.com
Victor G. Hardy State Bar No. 00790821
(Admitted Pro Hac Vice)

Andrew G. DiNovo State Bar No. 00790594 Adam G. Price State Bar No. 24027750 Jay D. Ellwanger State Bar No. 24036522
DiNovo PRICE ELLWANGER & HARDY LLP

7000 North MoPac Expressway, Suite 350 Austin, Texas 78731 [phone]
[phone] (fax)

vhardy~dpelaw.com
Of

counsel:

S. Calvin Capshaw State Bar No. 03783900 Elizabeth L. DeRieux State Bar No. 05770585
CAPSHAW DERiEUX 1127 Judson Road, Suite 220

P.O. Box 3999 Longview, TX 75606-3999 [phone]
[phone] (fax)

ccapshaw~capshawlaw.com

11

Robert M. Parker State Bar No. 15498000 Robert C. Bunt State Bar No. 00787165 Charles Ainsworth State Bar No. 0078352
PARKER, BUNT & AINSWORTH, P .C. 100 East Ferguson, Suite 1114

Tyler, Texas 75702 [phone]
[phone] (fax)

Attorneys for Plaintiff SOFTWARE RIGHTS ARCHIVE LLC

CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing instruent has

been forwarded to all counsel of record pursuant to Federal Rules of Civil Procedure on this the
ie; ¥"y of June, 2009.

12