                                                                           FILED
                           NOT FOR PUBLICATION                              JUN 22 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



MERCHANT TRANSACTION                             No. 10-16008
SYSTEMS, INC.,
                                                 D .C. No. 2:02-cv-01954-MHM
              Plaintiff - Appellee,

  v.                                             MEMORANDUM *

NELCELA, INC., LEN CAMPAGNA, and
ALEC DOLLARHIDE,

               Defendants - Appellants,

EBOCOM, INC. and POST
INTEGRATIONS, INC.,

              Defendants - Appellees,

  v.

MARY GERDTS, DOUGLAS
MCKINNEY, GENE CLOTHIER, and
TONI CLOTHIER,

              Third-party-defendant -
Appellees.




        *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
                    Appeal from the United States District Court
                             for the District of Arizona
                    Mary H. Murguia, District Judge, Presiding

                       Argued and Submitted May 11, 2011
                            San Francisco, California

Before: GOULD and M. SMITH, Circuit Judges, and GERTNER, District Judge.**

      Defendants-Appellants Nelcela, Inc., Len Campagna, and Alec Dollarhide

appeal the Amended Judgment of the district court dated April 14, 2010, which,

inter alia, awarded Merchant Transactions Systems, Inc. (MTSI), POST

Integrations, Inc. (POST), and Ebocom, L.L.C., damages for breach of contract,

unjust enrichment, and fraud under Arizona law. Because the parties are familiar

with the remaining facts and procedure, we will explain the record only when it is

necessary to resolve an issue raised on appeal. We have jurisdiction under 28

U.S.C. § 1291, and we affirm.

I.    Statute of Limitations

      Appellants assert that Lexcel, Inc.’s (Lexcel’s) suit was barred by a three-

year statute of limitations for copyright infringement claims. See 17 U.S.C. §

507(b). Nelcela settled these claims with Lexcel after the Phase I trial and thus

none of these claims proceeded to a judgment which can be reviewed. “Where


       **
             The Honorable Nancy Gertner, United States District Judge for the
District of Massachusetts, sitting by designation.

                                          2
parties enter into a settlement that resolves all outstanding disputes, we are unable

to grant effective relief and the case becomes moot.” DHX, Inc. v. Allianz AGF

MAT, Ltd., 425 F.3d 1169, 1174 (9th Cir. 2005).

      Appellants also contend that MTSI’s state-law claims are barred by various

Arizona statutes of limitations. Under Arizona law, “[t]he statute of limitations is a

privilege which the party may waive at any time.” Lewis R. Pyle Mem’l Hosp. v.

Gila Cnty., 775 P.2d 1146, 1148 (Ariz. Ct. App. 1989). While Appellants included

a boilerplate statute of limitations defense in their answer to MTSI’s complaint,

they did not specifically raise the issue again until the charging conference on the

eighth day of trial. Even when they raised the argument, Appellants failed to

submit a jury instruction or adequately focus the issue for the district court. See

Grosvenor Props. Ltd. v. Southmark Corp., 896 F.2d 1149, 1152–53 (9th Cir.

1990). Statute of limitations questions often require the resolution of factual

disputes, see, e.g., Golden v. Faust, 766 F.2d 1339, 1341 (9th Cir. 1985), and

Nelcela’s dilatory behavior prevented the district court from putting the issue to the

jury. Given that “the defense of the statute of limitations is not favored” in Arizona,

O’Malley v. Sims, 75 P.2d 50, 54–55 (Ariz. 1938), and Nelcela made no effort to

meet its burden to prove that the statute barred MTSI’s claims, there was no error in

the district court’s rejection of Appellants’ statute of limitations arguments.


                                            3
II.    Analytic Dissection

       Nelcela argues that the district court erred in its Phase I summary judgment

by failing to consider the question of analytic dissection prior to the Phase I trial.

Although analytic dissection is relevant to a determination of ownership, see Brown

Bag Software v. Symantec Corp., 960 F.2d 1465, 1476 (9th Cir. 1992),

none of the parties moved the district court to engage in this analysis prior to the

Phase I trial. The district court’s decision to bifurcate the proceedings, in reliance

on the parties’ expressed positions and theories, was not an abuse of discretion. See

Danjaq LLC v. Sony Corp., 263 F.3d 942, 961 (9th Cir. 2001). Moreover, any error

in the merits of the district court’s analytic dissection was mooted by the settlement

of the copyright claims between Lexcel and Nelcela. See Gator.com Corp. v. L.L.

Bean, Inc., 398 F.3d 1125, 1132 (9th Cir. 2005).

III.   Jury Instructions

       Nelcela argues the district court erred in instructing the Phase II jury on the

outcome of the Phase I trial, the “work-for-hire” doctrine, and the import of the

mutual confidentiality agreement. We disagree.

       Nelcela’s argument concerning the Phase I instruction is not based on a

purported misstatement of law but, rather, claims a misstatement of the facts

decided in Phase I. The instruction is an accurate characterization of the Phase I


                                            4
verdict and proceedings. We see no abuse of the district court’s discretion in

formulating and giving that instruction. See Dang v. Cross, 422 F.3d 800, 804 (9th

Cir. 2005) (holding that a district court’s formulation of jury instructions in a civil

case is reviewed for abuse of discretion).

      Likewise, the instruction on the work-for-hire doctrine was derived from 17

U.S.C. § 201(b), which the district court quoted nearly verbatim. This instruction

was clearly not a misstatement of the law, and the district court’s decision to give it

as as a baseline rule was reasonable in light of Dollarhide’s claim to have designed

the Nelcela software while in the employ of MTSI.

      Finally, Nelcela expressly declined to object to the instruction on the Mutual

Confidentiality Agreement and waiver, and now proffers no explanation for why

the district court’s instruction was either legally deficient or substantially prejudiced

the result. See Phil. Nat’l Oil Co. v. Garrett Corp., 724 F.2d 803, 807 (9th Cir.

1984) (citing Fed. R. Civ. P. 51).

IV.   Sufficiency of the Evidence

      Appellants argue that district court erred in denying judgment as a matter of

law on Appellees’ fraud claims. However, like the district court, we too are “firmly

convinced” that the fraud verdicts were supported by substantial evidence. See

Taeger v. Catholic Family & Cmty. Servs., 995 P.2d 721, 730 (Ariz. Ct. App. 1999).


                                             5
The evidence adduced at trial revealed that Nelcela misled the POST parties in

claiming to own the software it was selling and in making representations to Mary

Gerdts that there was no cloud on that ownership. Carl Kubitz testified that, during

his meetings with Dollarhide and Campagna in 1999, he did not give Nelcela

permission to use Lexcel’s source code and Campagna promised to stop using it.

Gerdts testified directly about her reliance on Nelcela’s assertions about the

viability of its software. She further testified to being assured the conversion would

work and that the system was sound. She recounted how an $800,000 overdraft

harmed her business and that Nelcela refused to give her programmers the software

to attempt to correct the problems it created. That Nelcela did not own or have the

right to sell the software it was selling to POST was known by Appellants when

they made representations to prospective buyers. Moreover, Gerdts testified that

she would not have entered into an agreement if she had known that Nelcela did not

own the software it was selling. There was significant circumstantial evidence as

well, including evidence that Dollarhide destroyed the computer hard drives after

the initiation of litigation.

V.     Motion for New Trial

       Among other things, the party seeking a new trial must “establish that the

conduct complained of prevented the losing party from fully and fairly presenting


                                           6
his case or defense.” Jones v. Aero/Chem Corp., 921 F.2d 875, 879 (9th Cir. 1990).

Here, the district court flatly rejected the argument that it had been misled by

POST’s pretrial filings and in limine motions. We have found no reason to question

that determination. There is no evidence POST improperly withheld evidence or

failed to make appropriate disclosures to the district court.

                                          ***

      We have considered Appellants’ myriad other arguments and assignments of

error and hold that they do not alter our decision. For the foregoing reasons, the

judgment of the district court is AFFIRMED.




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