[00:00:01] Speaker 05:
We will now hear argument in the case of J.B.

[00:00:04] Speaker 05:
Carter Enterprises versus Evalon, or Elobon, excuse me.

[00:00:30] Speaker 05:
Mr. Mushkin, right?

[00:00:32] Speaker 05:
Yes, sir.

[00:00:33] Speaker 05:
Good morning.

[00:00:34] Speaker 05:
Good morning.

[00:00:53] Speaker 04:
Please proceed.

[00:00:54] Speaker 04:
Thank you.

[00:00:55] Speaker 04:
My name is Mike Mushkin.

[00:00:56] Speaker 04:
I represent ATMMS.

[00:00:58] Speaker 04:
With me is my partner, Joe Coppage.

[00:01:01] Speaker 04:
May it please the court.

[00:01:06] Speaker 04:
The standard of review in this case is clear error.

[00:01:11] Speaker 04:
And direct evidence of intent is not the standard of the law.

[00:01:18] Speaker 04:
And in this case, that was the standard applied by the district court judge.

[00:01:25] Speaker 04:
She was looking for direct intent.

[00:01:27] Speaker 04:
The case law is clear.

[00:01:29] Speaker 04:
Very rarely

[00:01:31] Speaker 04:
Does someone come up and say, I defrauded you.

[00:01:35] Speaker 04:
I did this.

[00:01:35] Speaker 04:
I did that.

[00:01:36] Speaker 04:
No, they deny.

[00:01:37] Speaker 04:
They always deny.

[00:01:39] Speaker 05:
Counsel, let me ask you this.

[00:01:41] Speaker 05:
Are we reviewing the rulings, the factual rulings of the district court for clear error?

[00:01:46] Speaker 05:
Yes, sir.

[00:01:46] Speaker 05:
Okay.

[00:01:49] Speaker 04:
Negative misrepresentation means there was an oral contract.

[00:01:55] Speaker 04:
What did they negligently represent if it wasn't in furtherance of that contract?

[00:02:01] Speaker 04:
promised to be EMV compliant by a date certain.

[00:02:05] Speaker 04:
The entire industry changed.

[00:02:08] Speaker 04:
And over and over again, they misrepresented to my client.

[00:02:13] Speaker 04:
The testimony is unrefuted.

[00:02:16] Speaker 04:
They were never trying to be compliant.

[00:02:18] Speaker 04:
So every time they said it was a direct misrepresentation.

[00:02:24] Speaker 02:
Council, what do we do with the conclusion that

[00:02:29] Speaker 02:
your client failed to prove damages.

[00:02:31] Speaker 02:
I mean, even if we were to agree that there was error on some of the merits of these charges or of these claims, if there's no amount of damages proven, what does it matter?

[00:02:44] Speaker 04:
Your Honor, it was clear error.

[00:02:46] Speaker 04:
There was no evidence provided to refute the damage testimony.

[00:02:51] Speaker 04:
Zero.

[00:02:52] Speaker 04:
There wasn't even extensive cross-examination.

[00:02:56] Speaker 04:
Elevon knew every penny that ATMMS made.

[00:03:03] Speaker 04:
They're the processing bank.

[00:03:05] Speaker 02:
Well, I read the district court's conclusion as that the evidence presented wasn't competent evidence because the witness who, the sole witness who talked about damages didn't provide any sort of detail to allow the district court to actually verify that the accuracy of the information didn't introduce into the record the source documents

[00:03:25] Speaker 02:
and also didn't have any particular expertise in accounting, although I'm not sure that would have strictly been required.

[00:03:32] Speaker 02:
So the district court gave a whole laundry list of reasons why I don't find this evidence to be competent.

[00:03:38] Speaker 04:
And respectfully, it was clear error.

[00:03:40] Speaker 04:
There was no evidence to the contrary.

[00:03:43] Speaker 02:
Well, it doesn't matter if there's no evidence to the contrary if the evidence presented isn't competent.

[00:03:48] Speaker 04:
Your Honor, if the evidence wasn't competent.

[00:03:50] Speaker 02:
Right, so address that point.

[00:03:51] Speaker 02:
Why was that error for the district court to say this evidence isn't sufficient?

[00:03:55] Speaker 04:
because it was a mathematical equation.

[00:03:58] Speaker 04:
There was no testimony to dispute that $44 million in processing was done.

[00:04:03] Speaker 04:
There was no testimony to dispute that there was a small fee charged for each transaction.

[00:04:08] Speaker 04:
Mr. Poggi testified in detail of the length of the contracts, the type of revenue, and the amount.

[00:04:15] Speaker 04:
And he calculated it to the penny, 5 million in change.

[00:04:21] Speaker 04:
Then they had future damages and a monthly calculation as the contracts matured.

[00:04:26] Speaker 04:
It's simply error.

[00:04:28] Speaker 04:
There's no dispute that those are the numbers and there was no dispute that those numbers were accurate.

[00:04:34] Speaker 04:
The judge just didn't want to listen to this court's prior ruling and didn't want to award damages.

[00:04:41] Speaker 04:
Our brief is pretty clear that we believe

[00:04:46] Speaker 04:
that the court didn't follow the Ninth Circuit's prior directive.

[00:04:50] Speaker 05:
Counsel, with respect, I don't think you've answered my colleague's question.

[00:04:54] Speaker 05:
The district court found that the testimony that you're relying on now was not competent based upon the qualifications, experience, and what was relied upon by your, end quote, expert, end quote.

[00:05:06] Speaker 05:
It just didn't consider it relevant, didn't consider it competent.

[00:05:10] Speaker 05:
So what's your best argument that the district court was wrong in that regard?

[00:05:14] Speaker 05:
Tell us about the expertise

[00:05:16] Speaker 05:
of the person involved, tell us about what he looked at and why the evidence that we're talking about here is competent.

[00:05:24] Speaker 04:
Mr. Poggi was the general manager of the company.

[00:05:26] Speaker 04:
It was his obligation and duty to maintain the records, to track all of the transactional work that went on, and to reconcile each of those transactional documents on a monthly basis.

[00:05:40] Speaker 04:
Remember, we rely on Elevon for that information.

[00:05:45] Speaker 04:
It's not information generated by us, it's information generated by Elevon.

[00:05:51] Speaker 04:
And we, the testimony was clear and concise.

[00:05:55] Speaker 04:
This is a mathematical equation.

[00:05:57] Speaker 04:
44 million in transactions yields X amount of transactional revenue.

[00:06:05] Speaker 04:
And it, unrefuted, not a single witness testified otherwise.

[00:06:10] Speaker 04:
And if I can, I'll reserve, unless you have other questions.

[00:06:13] Speaker 05:
Whatever you want to do.

[00:06:14] Speaker 05:
It's your floor.

[00:06:16] Speaker 04:
I appreciate it.

[00:06:17] Speaker 04:
I want to reserve three or four minutes, and I'm at almost 10.

[00:06:20] Speaker 05:
You've got six minutes plus.

[00:06:25] Speaker 04:
What we're seeking from this court is fundamental fairness.

[00:06:31] Speaker 04:
Elavon did it.

[00:06:32] Speaker 04:
There's no question.

[00:06:34] Speaker 04:
Negligent misrepresentation was found.

[00:06:37] Speaker 04:
In fact, intentional misrepresentations were found.

[00:06:40] Speaker 04:
That's not what the district court found.

[00:06:43] Speaker 04:
I misspoke.

[00:06:44] Speaker 04:
In fact, intentional misrepresentations were made.

[00:06:48] Speaker 04:
There's no question that they were intentional.

[00:06:50] Speaker 05:
With respect.

[00:06:51] Speaker 05:
We respect your role as counsel.

[00:06:54] Speaker 05:
We know you're a good advocate.

[00:06:56] Speaker 05:
But we have to look at the record.

[00:06:58] Speaker 05:
And when we look at the record and we see what was said, we see what the district court said.

[00:07:04] Speaker 05:
We have a clear error standard here.

[00:07:06] Speaker 05:
What we need you to do, and it's your burden, is to show us why the district court committed clear error.

[00:07:13] Speaker 05:
And insofar as the intention of the parties and so on, what you're saying is not what the district court found.

[00:07:19] Speaker 05:
The district court considered a variety of evidence, concluded there was no meeting of the minds, concluded a lot of other things that you disagree with.

[00:07:27] Speaker 05:
But the nature of our system is such that you now have the burden to show us why the district court

[00:07:33] Speaker 05:
having considered all this evidence, concluded differently than what you did.

[00:07:38] Speaker 05:
So maybe take it piece by piece.

[00:07:40] Speaker 05:
You said the parties, for example, had a meeting in the mines.

[00:07:43] Speaker 05:
The district court found otherwise.

[00:07:45] Speaker 05:
What would you point us to in the record that shows that the district court clearly erred in that regard?

[00:07:53] Speaker 04:
The clear meeting of the mines was to have EMV capability by the October date.

[00:08:00] Speaker 05:
Well, that's what you're saying.

[00:08:02] Speaker 05:
What would you point to in the record that would show that the district court, who found to the contrary, was wrong, clearly wrong?

[00:08:11] Speaker 04:
Communication after communication, promising to be done by then.

[00:08:14] Speaker 04:
Meeting after meeting, promising to be done by then.

[00:08:18] Speaker 04:
Every single thing was based on that date, industry-wide, and then eight days before the shift, we're not doing it.

[00:08:27] Speaker 04:
That's step one.

[00:08:28] Speaker 04:
Step two, intent.

[00:08:30] Speaker 04:
Presbillic testified they were never working to be compliant for our program, for their program, for us.

[00:08:40] Speaker 04:
They were never working to be compliant.

[00:08:42] Speaker 04:
That's Presbillic, their witness' testimony.

[00:08:45] Speaker 05:
Okay.

[00:08:45] Speaker 05:
Forgive me, counsel.

[00:08:46] Speaker 05:
Will you give us citations in the record?

[00:08:48] Speaker 05:
You bet.

[00:08:48] Speaker 05:
To both those points, please.

[00:08:54] Speaker 04:
So, um, the

[00:08:58] Speaker 04:
First site in the record is to the intent to keep us as a customer, even though they knew they weren't going to meet the deadline.

[00:09:08] Speaker 04:
And that's 7 AER 1202- Say that again.

[00:09:12] Speaker 04:
7 AER 1202-1203.

[00:09:17] Speaker 04:
Then the Prisbellic testimony towards indulgence.

[00:09:47] Speaker 04:
And that first citation was the Carmichael testimony.

[00:09:52] Speaker 04:
And then the Prisbillic testimony.

[00:10:02] Speaker 04:
It's 881.

[00:10:03] Speaker 04:
It's ADR 881?

[00:10:06] Speaker 04:
Yeah, 6 AER 881.

[00:10:10] Speaker 04:
Elevon was never striving to have Commerce STK ready for the EMV deadline.

[00:10:16] Speaker 05:
It could be no more clear.

[00:10:18] Speaker 05:
Okay.

[00:10:18] Speaker 05:
And did not Elevon put people on who disagreed with those two points?

[00:10:25] Speaker 04:
No.

[00:10:26] Speaker 05:
They did not.

[00:10:26] Speaker 05:
They did not.

[00:10:27] Speaker 05:
So you're saying that these two points are irrefutable, no dispute whatsoever.

[00:10:32] Speaker 05:
The district court was just clearly wrong.

[00:10:35] Speaker 04:
And held the matter under advisement for almost eight months.

[00:10:39] Speaker 04:
Just missed it, Judge.

[00:10:40] Speaker 04:
I don't know how else to describe it.

[00:10:42] Speaker 04:
That cannot be more clear.

[00:10:45] Speaker 04:
They didn't bring Mr. Pisbillich to the trial to testify.

[00:10:49] Speaker 04:
They relied on his deposition.

[00:10:51] Speaker 04:
They didn't bring him in.

[00:10:57] Speaker 04:
I have five minutes left if you have any questions.

[00:10:59] Speaker 02:
Would you talk about the intentional interference claim a bit?

[00:11:02] Speaker 02:
I'm sort of wrestling with the legal standard there and how it applies in this particular context.

[00:11:08] Speaker 02:
Because as I understand it, you can have intentional interference when you have somebody who has the specific intent to interfere, but also it exists when a person knows that an interference is going to substantially, or is likely to occur, and yet proceeds with their course of conduct.

[00:11:27] Speaker 02:
I assume that you're relying mostly on the second one, that they knew that their conduct was going to interfere with your client's business relationships.

[00:11:36] Speaker 02:
Is that correct?

[00:11:37] Speaker 02:
Yes, Your Honor.

[00:11:38] Speaker 02:
So boil down for me, what is the interference again that you are worried about?

[00:11:43] Speaker 04:
So it's a very interesting point on the facts of this case because remember, they know everything.

[00:11:52] Speaker 04:
They know every dollar that comes in.

[00:11:54] Speaker 04:
They know the source of every dollar, the locations.

[00:11:57] Speaker 04:
It's all known.

[00:11:58] Speaker 04:
They know that we represent casinos.

[00:12:00] Speaker 04:
We're a special category for them.

[00:12:06] Speaker 04:
And so now,

[00:12:09] Speaker 04:
They don't meet that deadline.

[00:12:13] Speaker 04:
And we're telling them, meeting after meeting, week after week, we're losing customers.

[00:12:18] Speaker 04:
We can't bid new work.

[00:12:19] Speaker 04:
We can't promise to be compliant.

[00:12:23] Speaker 04:
You're not getting us there.

[00:12:24] Speaker 04:
And they admit to that.

[00:12:25] Speaker 04:
They admit to knowing that we're suffering.

[00:12:29] Speaker 04:
And what's most telling is their own employees wanted to get us relief.

[00:12:34] Speaker 04:
They wanted an amnesty for the shift.

[00:12:38] Speaker 04:
But the Elevon wouldn't give it to us.

[00:12:41] Speaker 04:
And the reasoning is staggering because we didn't grow enough in the last quarter.

[00:12:48] Speaker 04:
We couldn't.

[00:12:50] Speaker 04:
We couldn't promise compliance to our casino customers.

[00:12:56] Speaker 04:
It's beyond measure for me.

[00:12:59] Speaker 04:
They knew and they decided to work on Canada and ignore what was needed for our client.

[00:13:08] Speaker 04:
Now you're going to hear from them that we could have done this other magical connection, but that's a complete red herring and I'm going to save two and a half, three minutes.

[00:13:18] Speaker 04:
Thank you very much, your honor.

[00:13:20] Speaker 04:
Okay.

[00:13:21] Speaker 05:
So now let's hear from, is it Gamby?

[00:13:25] Speaker 05:
Is that correct?

[00:13:26] Speaker 00:
Yes, your honor.

[00:13:27] Speaker 00:
I'm Sydney Gamby and I represent Elevon Inc.

[00:13:31] Speaker 00:
HMMS wants this court to decide that Judge Dorsey ignored all the evidence and pulled her findings of fact out of thin air.

[00:13:39] Speaker 00:
That's what they have to show to be successful on this appeal today.

[00:13:43] Speaker 00:
But Judge Dorsey did not ignore all the evidence and get everything wrong.

[00:13:47] Speaker 00:
After three days of trial and listening to three live witnesses, two deposition witnesses, and admitting over 100 exhibits into evidence, Judge Dorsey correctly found that HMMS failed

[00:13:59] Speaker 00:
to prove its claims, except for negligent misrepresentation.

[00:14:03] Speaker 00:
And she supports her findings in a 50-page order that meticulously cites to the trial record.

[00:14:09] Speaker 00:
Her findings are reasonable, supported by the evidence, and must be affirmed.

[00:14:13] Speaker 00:
And at bottom, Judge Dorsey agreed with ATMMS on its primary theory of liability that underlied all of its claims.

[00:14:20] Speaker 00:
She found that even if it didn't mean to, Elevon had negligently misrepresented that it would provide a solution comprised of both hardware and software for ATMMS to be able to process EMV transactions through Converge by the liability shifting.

[00:14:37] Speaker 05:
Council, would you please, you heard your opposing council cite ADR 1202, 1203 and 881

[00:14:46] Speaker 05:
and vehemently contends that these were uncontroverted, if you will, facts, claims by your people.

[00:14:56] Speaker 05:
What's your response to his comment?

[00:14:59] Speaker 00:
The first citation is to the testimony of Ms.

[00:15:01] Speaker 00:
Lisa Carmichael.

[00:15:03] Speaker 00:
She's an Elavon witness.

[00:15:05] Speaker 00:
And she admitted that Elavon gave information to ATMS when it asked for it and that they didn't want ATMS to leave.

[00:15:13] Speaker 05:
But she didn't... Can you talk up just a little bit?

[00:15:15] Speaker 05:
It's hard to hear you in this.

[00:15:16] Speaker 00:
She didn't say that Elevon gave information because it wanted to keep ATMMS at all costs.

[00:15:26] Speaker 00:
And that's what ATMMS is arguing.

[00:15:28] Speaker 00:
It's something that the district court, that Judge Dorsey, did not agree with.

[00:15:32] Speaker 00:
She didn't buy it.

[00:15:34] Speaker 00:
And that's because Ms.

[00:15:35] Speaker 00:
Carmichael said

[00:15:36] Speaker 00:
that they were bracing for Elevon to leave.

[00:15:38] Speaker 00:
They thought ATMMS would.

[00:15:40] Speaker 00:
They knew that the information they were providing was not making ATMMS happy.

[00:15:45] Speaker 00:
And they gave it to them anyway, because they were partners.

[00:15:48] Speaker 00:
They were giving them timelines as those timelines shifted in real time.

[00:15:52] Speaker 02:
So if they knew that the timelines they were giving were not true,

[00:15:56] Speaker 02:
They were never going to meet them.

[00:15:57] Speaker 02:
How is that not fraud?

[00:15:59] Speaker 00:
They did not know at the time they were giving them that they weren't going to meet them.

[00:16:02] Speaker 02:
They were providing... I thought there was evidence in the record that they knew that in terms of the specific functionality that this customer wanted, it wasn't going to happen.

[00:16:12] Speaker 00:
So there's a distinction that the district court made between overall providing a solution through Converge.

[00:16:18] Speaker 00:
That's Commerce SDK and pin debit target dates.

[00:16:22] Speaker 00:
So one happens before the liability shift and one happens after.

[00:16:26] Speaker 00:
With respect to Commerce SDK, that was a software development kit that was being developed by Elevan.

[00:16:33] Speaker 00:
And it was not ever striving to be ready for the liability shift.

[00:16:38] Speaker 00:
And to analyze Elevan's intent, Judge Dorsey looked at all of this from Elevan's perspective.

[00:16:44] Speaker 00:
So from Elevan's perspective,

[00:16:47] Speaker 00:
It had had a conversation with ATMMS long before EMV when ATMMS first integrated to Elevant about options to do so.

[00:16:55] Speaker 00:
And this isn't to say that ATMMS did anything wrong, but its choices about direct certification versus integrating to virtual merchant were relevant to Elevant's state of mind later.

[00:17:06] Speaker 00:
ATMMS initially declined direct certification.

[00:17:10] Speaker 00:
It didn't want to take on those requirements.

[00:17:11] Speaker 00:
And as you've said, those conversations were pre this shift in technology.

[00:17:15] Speaker 00:
They were.

[00:17:15] Speaker 00:
They were.

[00:17:16] Speaker 00:
And so ATMS declined direct certification and went through what later became Converge.

[00:17:21] Speaker 00:
So fast forward to EMV, and Elevan's sending a lot of emails about EMV readiness to its customers.

[00:17:27] Speaker 00:
And it doesn't specify that Converge specifically as an integration method will not be ready.

[00:17:33] Speaker 00:
The reason that Judge Dorsey found this was a negligent misrepresentation and not an intentional one is because Elevan didn't even realize that it had misled its customer.

[00:17:41] Speaker 00:
On the one hand, it was sending all of these communications to all of its customers.

[00:17:45] Speaker 00:
And it didn't temper those by, hey, you're a class A customer, these are for you, or you're a class B customer using Converge to integrate, these are not for you.

[00:17:54] Speaker 00:
She found that they should have taken more care in those communications and delivered them to ATMMS with some qualifiers.

[00:18:01] Speaker 02:
But when it came to... That would make sense to me, and that does make sense to me to some degree in terms of those broad communications.

[00:18:07] Speaker 02:
But also in the record are specific questions from ATMMS about the concerns that it was having and being able to function in the

[00:18:15] Speaker 02:
new world, right?

[00:18:17] Speaker 02:
And there were specific responses to those requests.

[00:18:20] Speaker 02:
So you can't just say, well, we were not careful about our general responses when you were giving specific responses to this customer and your client knows the needs of this particular customer.

[00:18:31] Speaker 00:
Yes, that's correct.

[00:18:33] Speaker 00:
There were also direct communications.

[00:18:34] Speaker 00:
And in those direct communications, starting back in 2013 and carrying through,

[00:18:38] Speaker 00:
Elevan gave moving target development dates, and that was something that was discussed extensively at trial, that these were moving target software development dates.

[00:18:47] Speaker 00:
And Mr. Poggi even recognized that he knew that those were moving target shifting software development priorities.

[00:18:54] Speaker 00:
He's in the software game.

[00:18:55] Speaker 00:
He understands what that means, and he admitted that at trial.

[00:18:59] Speaker 00:
But Elevan was simply roadmapping its expectations for when it would have things available.

[00:19:05] Speaker 00:
In such a huge liability shift, those priorities and those moving targets, they were shifting constantly.

[00:19:12] Speaker 00:
But it didn't want to not give that information to ATMS.

[00:19:15] Speaker 00:
It wanted to provide it as up to date as it was.

[00:19:17] Speaker 02:
I mean, I just don't see in the record where Elavon was being upfront about, this is what's the big picture.

[00:19:22] Speaker 02:
This is what's going on.

[00:19:23] Speaker 02:
I see in the record that Elavon was saying, don't worry about it.

[00:19:26] Speaker 02:
It's going to happen.

[00:19:27] Speaker 00:
They did say that CONVERGE was going to be ready.

[00:19:29] Speaker 00:
And that's where Judge Dorsey identified there was an internal communication problem at Elavon.

[00:19:34] Speaker 00:
So Converge could be used a couple of different ways.

[00:19:37] Speaker 00:
It could be used off the shelf as a class A solution where you simply plug it in and go.

[00:19:41] Speaker 00:
You don't have your own software that you're integrating to.

[00:19:45] Speaker 00:
And instead, HMMS used it as an integration method.

[00:19:49] Speaker 00:
And in all of their relationship managers switching over, there was one, Ryan Hicks, that said to HMMS early in 2013 that Converge would be on the target for

[00:20:01] Speaker 00:
sometime in 2013 and that moved to 2014 and later to Q1 or Q2 in 2015.

[00:20:07] Speaker 00:
Now, those targets did get shifted as time went on and that's why Judge Dorsey found that it was negligent because they didn't specify which type of converge they were talking about, whether it was off the shelf or whether it was the direct integration, I'm sorry, not direct integration, the integration method

[00:20:26] Speaker 00:
of CONVERGE.

[00:20:27] Speaker 00:
And finally, when it did say we are developing a software development kit in Commerce SDK and had ATMMS or let ATMMS join that beta program, it started providing those specific target dates for functionality that ATMMS asked for in CONVERGE.

[00:20:44] Speaker 02:
But I guess ultimately I'm just not quite sure how to square the record with the district judge's conclusion that this was just negligence and not

[00:20:54] Speaker 02:
intentional misrepresentation because if I look at the elements of intentional misrepresentation, I mean, there's two key ones, I think, that the defendant knew or believed the representation was false or had an insufficient basis for making the representation.

[00:21:09] Speaker 02:
That latter part seems to be triggered by these set of facts in terms of we're making representations about timing, but we know in the back room that this is a moving target, that this is probably not going to happen, and yet we're going to say it anyways.

[00:21:23] Speaker 02:
to quell the concerns of this customer.

[00:21:26] Speaker 02:
And then the other element that's really important is that the defendant intended to induce the plaintiff to rely.

[00:21:31] Speaker 02:
How is that not met when aside from the comment, the one comment in the record about we wanted to keep the customer, you could just look at this circumstance and you could look at the business relationship and know that's got to be the reason they're saying this.

[00:21:46] Speaker 02:
There's no other reason to say this.

[00:21:48] Speaker 02:
Don't worry about it.

[00:21:49] Speaker 02:
This is going to happen.

[00:21:50] Speaker 02:
We're going to get the technological fix so that your business model will work with our product.

[00:21:55] Speaker 02:
What's the other reason to say that other than to keep them as a customer and get them to rely on you being a good supplier for them?

[00:22:03] Speaker 00:
It was about relationship management.

[00:22:05] Speaker 00:
That's what Ms.

[00:22:05] Speaker 00:
Carmichael and Mr. Morris, whose deposition testimony was read.

[00:22:09] Speaker 00:
OK, so then how is that element not met, the inducement or the intent element?

[00:22:14] Speaker 00:
How is that not met if it's relationship management?

[00:22:16] Speaker 00:
The intent element is separate from knowing that it was false.

[00:22:19] Speaker 00:
Judge Dorsey correctly found that.

[00:22:20] Speaker 00:
And the intent element wasn't there because she looked at all of the evidence that Elevon didn't have any reason to want to harm ATMMS.

[00:22:28] Speaker 00:
For example, they process transactions together and they both share in those fees.

[00:22:34] Speaker 02:
Which element tells me that they have to have a purpose of trying to harm the other party?

[00:22:39] Speaker 00:
I don't think that's part of the element.

[00:22:41] Speaker 00:
Oh, it's not a specific element.

[00:22:43] Speaker 00:
It's just something that she evaluated because there was no direct evidence of fraudulent intent, right?

[00:22:48] Speaker 00:
So she looked at the circumstantial evidence and she pulled all of that together to find that there simply wasn't an intent to induce ATMMS's reliance on those statements.

[00:22:58] Speaker 00:
In fact, Ms.

[00:22:59] Speaker 00:
Carmichael admitted that they thought ATMMS would leave.

[00:23:02] Speaker 00:
They were bracing themselves for that.

[00:23:03] Speaker 00:
That's on page 1202 of the record and 1203.

[00:23:07] Speaker 02:
But didn't you just say in your argument a few minutes ago that they were saying these to avoid that possibility, to get them to stay?

[00:23:13] Speaker 00:
No, if I said that, that was a misstatement.

[00:23:15] Speaker 00:
They said it even knowing that they would probably leave.

[00:23:19] Speaker 00:
They didn't say it to get them to stay.

[00:23:21] Speaker 00:
They said it in spite of the fact that they were bracing themselves for ATMMS to leave.

[00:23:25] Speaker 00:
They thought they would find another processor.

[00:23:28] Speaker 00:
They thought that they would go somewhere else or that they would switch to direct certification.

[00:23:32] Speaker 00:
And this is where Elevant had its own internal miscommunication.

[00:23:36] Speaker 00:
It didn't realize that ATMMS didn't remember it could directly certify.

[00:23:40] Speaker 00:
It didn't realize that it had never expressly said, you can have EMV by the liability shift date if you directly certify.

[00:23:48] Speaker 00:
And that's where Judge Dorsey found that it was negligence, because it was simply the internal departments of Elevant not coordinating.

[00:23:55] Speaker 00:
And you can see that when they give Mr. Poggi information on equipment swaps, for example.

[00:24:02] Speaker 00:
When Mr. Poggi was upset that he had bought the L5200s and needed to switch to the Ingenicos, Mr. Morris pushed for amnesty for HMMS all the way to the top of Elevon.

[00:24:12] Speaker 00:
He was ultimately denied.

[00:24:14] Speaker 00:
But it simply didn't occur to him to tell Mr. Poggi, hey, I know that you had this option in 2011 of direct certification.

[00:24:21] Speaker 00:
You could switch to it now and get all the functionality you desire.

[00:24:25] Speaker 00:
And it wasn't until HMMS was in the beta program at the end of 2015 that Eric Prisbillich

[00:24:31] Speaker 00:
really drilled down deep with ATMMS about its priorities.

[00:24:36] Speaker 05:
This is all very interesting, but as my colleague has pointed out, at the very least, there's negligence.

[00:24:46] Speaker 05:
But you've clarified and amplified with the record, your client really wanted to keep this relationship.

[00:24:54] Speaker 05:
They wanted to say things that would induce the other side to remain with them, rely upon them,

[00:25:00] Speaker 05:
And when you know that you can't do it somewhere in the business, and that apparently is cited in the record, and you continue to say that, is that negligence or fraud?

[00:25:13] Speaker 00:
Well, Judge Dorsey found it was negligence because she didn't believe necessarily everything that all of the witnesses stood at trial, right?

[00:25:21] Speaker 00:
She made credibility determinations.

[00:25:23] Speaker 05:
This is where we have to look at clear error.

[00:25:25] Speaker 05:
I mean, anybody in this age

[00:25:29] Speaker 05:
that has dealt with software knows this is an inexact art.

[00:25:34] Speaker 05:
It changes.

[00:25:35] Speaker 05:
It's hard to do.

[00:25:37] Speaker 05:
And particularly if you're dealing with things that are extremely complex, it can take much longer.

[00:25:43] Speaker 05:
What troubles me here is it looks like you've got a relationship.

[00:25:48] Speaker 05:
You wanted to keep it.

[00:25:51] Speaker 05:
People within your client's business kept saying nice things that lulled the other side into a sense of security.

[00:26:00] Speaker 05:
and then pull the plug at the very end, at least that's the allegation.

[00:26:04] Speaker 05:
The judge found at least it was negligence.

[00:26:07] Speaker 05:
What's your best argument that it's not fraud?

[00:26:10] Speaker 05:
Fraud is where you intentionally desire the other person to rely upon a false claim.

[00:26:17] Speaker 05:
Why is this not fraud?

[00:26:19] Speaker 00:
She did hear testimony about oral representations that Elevon did tell HMMS eventually it could directly certify.

[00:26:26] Speaker 00:
She just found it was too late, that they didn't realize soon enough that they needed to make that statement.

[00:26:31] Speaker 00:
And that's why she didn't find that it was fraud.

[00:26:34] Speaker 00:
Because those statements were made in September 2015 in connection with the beta program, but they were too late and they weren't in writing.

[00:26:41] Speaker 00:
And she couldn't understand why Elevon didn't tell ATMMS sooner about direct certification, if they could have everything that they wanted.

[00:26:49] Speaker 00:
and why Elevon would have any motive or reason to mislead ATMMS when ATMMS could have what it wanted through something else Elevon offered, direct certification.

[00:27:01] Speaker 05:
And what was that?

[00:27:02] Speaker 05:
What else did they offer that would have solved their problem?

[00:27:05] Speaker 00:
Direct certification, where ATMMS could take its own software and tie it directly into Elevon's processing host, which had the capability of processing EMV.

[00:27:16] Speaker 05:
And that was offered?

[00:27:17] Speaker 00:
It was offered in 2011, and so that's where Judge Dorsey found that ELEVON was negligent, because it never reminded ATMMS of that option.

[00:27:25] Speaker 00:
From ELEVON's perspective, it was ready in 2013 because its host could process EMV, but it never told ATMMS, hey, you might want to think about your integration method, because Converge is not going to be ready, but you can have this through direct certification.

[00:27:40] Speaker 00:
And there was simply nothing in the record

[00:27:42] Speaker 00:
that she could determine that that was made intentionally to harm ATMMS.

[00:27:47] Speaker 00:
If ELE1 has the ability to give something to ATMMS that can allow ATMMS to have what it wants, why wouldn't it just tell them?

[00:27:56] Speaker 00:
And she determined, based on all of the testimony she heard and all of the exhibits that she looked at, that they just didn't realize they had misled ATMMS in the first place and that they needed to make that representation to ATMMS.

[00:28:08] Speaker 01:
So, Counsel, you said that the district judge

[00:28:11] Speaker 01:
did not accept all the testimony or rejected some testimony in determining whether certain representations that were false were intentional.

[00:28:21] Speaker 01:
But it seems like some of that testimony comes from Lisa Carmichael, who's Evalon's vice president.

[00:28:27] Speaker 01:
So I don't see how that advances your argument because if Evalon presented testimony that they were, through Carmichael, that they were saying the product would be ready by the EMV deadline,

[00:28:41] Speaker 01:
and it was to ensure that ATMMS would remain their client.

[00:28:46] Speaker 01:
How does that become a rejection of testimony or a credibility determination?

[00:28:52] Speaker 00:
I see that my time has run, but I'd like to answer the question.

[00:28:55] Speaker 03:
Go ahead and answer the question.

[00:28:56] Speaker 00:
So there's a precise point of Ms.

[00:28:58] Speaker 00:
Carmichael's testimony on page 1202 where she says, we didn't want to lose them as a partner.

[00:29:03] Speaker 00:
Of course we didn't, but we were bracing ourselves for them to leave anyway because we were giving them this information as a partner.

[00:29:10] Speaker 00:
And that didn't convince Judge Dorsey that Elevon meant to keep ATMMS at all costs.

[00:29:19] Speaker 00:
She found that they simply didn't realize what more they needed to tell ATMMS.

[00:29:23] Speaker 00:
Now, there are other places where there was also credibility determinations made for Ms.

[00:29:28] Speaker 00:
Carmichael's testimony.

[00:29:29] Speaker 00:
For example, Judge Dorsey saw

[00:29:31] Speaker 00:
that there was a bit of a dispute over when Pendebit specifically was available.

[00:29:37] Speaker 00:
And she didn't necessarily believe that Elevon had been telling ATMMS behind the scenes in oral phone calls that it could have everything that it needed by directly certifying.

[00:29:49] Speaker 00:
So those were some of the credibility determinations that she made.

[00:29:52] Speaker 00:
She also determined that Mr. Poggi wasn't credible when he flipped on the stand and said, different than in his deposition, that he believed that all of these

[00:30:00] Speaker 00:
representations were intentional.

[00:30:02] Speaker 00:
In deposition, he had acknowledged that they were communicating about the software environment, and he didn't believe that there were any intentional misstatements, and that Elvon probably thought its statements were partially true, indicating he knew there was some level of doubt there.

[00:30:17] Speaker 02:
I want to put a very fine point on it.

[00:30:21] Speaker 02:
On page 35 of the record, the district court finds that

[00:30:25] Speaker 02:
An Elavan employee testified it never intended to achieve what ATMMMS wanted by October 2015.

[00:30:34] Speaker 02:
With that finding, how is it legally possible to say that there wasn't fraud in this case?

[00:30:46] Speaker 00:
So this has to do with the specific product commerce STK.

[00:30:49] Speaker 00:
It was not striving to have that ready by the liability shift deadline.

[00:30:53] Speaker 00:
and there are no representations in the record that that specific product would be ready by October 2015.

[00:31:00] Speaker 00:
It was the totality of the representations that Judge Dorsey found were wrong and were false, right?

[00:31:06] Speaker 00:
That Elevon would have something available for ATMMS, some product available by the liability shift deadline.

[00:31:13] Speaker 00:
Okay.

[00:31:14] Speaker 05:
Other questions about my colleague?

[00:31:16] Speaker 05:
Thank you for your testimony or your argument, excuse me.

[00:31:21] Speaker 05:
All right, Mr. Mushkin, you have a little time for rebuttal.

[00:31:27] Speaker 04:
Thank you, thank you, and thank you.

[00:31:30] Speaker 04:
Your Honor, you hit it square on the head.

[00:31:33] Speaker 04:
How can Presbelloq testify that they were never striving?

[00:31:38] Speaker 04:
Yet, month after month, year after year, we're going to get it done.

[00:31:43] Speaker 04:
It doesn't make sense.

[00:31:45] Speaker 04:
And there's further proof in the record, because there was a sit-down, and it was recorded

[00:31:52] Speaker 04:
and it was sent to Elevon and they didn't dispute the content of the meeting and they were still promising SDK to be available.

[00:32:03] Speaker 04:
I warned you there'd be a red herring.

[00:32:06] Speaker 04:
Nowhere in the record was, did Elevon ever offer ATMMS direct certification.

[00:32:18] Speaker 04:
They sold them SDK.

[00:32:21] Speaker 04:
They sold the virtual merchant, they selected the machinery, and they selected every step in the chain.

[00:32:29] Speaker 04:
And to now come before this court and say, we could have somehow fixed it ourselves, it's just a preposterous notion.

[00:32:39] Speaker 04:
Any date they provided was a fraud because they weren't trying to get it ready.

[00:32:46] Speaker 04:
By definition, what was the oral contract?

[00:32:50] Speaker 04:
We're going to have a product for you.

[00:32:53] Speaker 04:
It's all there.

[00:32:54] Speaker 04:
The elements are there.

[00:32:55] Speaker 04:
The date, the product, the functionality.

[00:32:58] Speaker 04:
It's all there.

[00:33:00] Speaker 04:
I want to just end on one word.

[00:33:04] Speaker 04:
Partners.

[00:33:06] Speaker 04:
They used it.

[00:33:08] Speaker 04:
It's in the materials that we're partners.

[00:33:11] Speaker 04:
This isn't how you treat a partner.

[00:33:14] Speaker 04:
It's wrong.

[00:33:14] Speaker 04:
It's fraud.

[00:33:16] Speaker 04:
And it was intentional conduct.

[00:33:19] Speaker 04:
an accident.

[00:33:21] Speaker 04:
They're right.

[00:33:22] Speaker 04:
Those dates continue to move.

[00:33:25] Speaker 04:
All promising to be ready by the shift date and then eight days before the shift date, we're not going to make it.

[00:33:34] Speaker 04:
It's unconscionable to do that.

[00:33:36] Speaker 04:
Fundamental fairness says you can't do that.

[00:33:39] Speaker 04:
It's a fraud.

[00:33:40] Speaker 04:
And I respectfully submit and I'll answer any questions you might have.

[00:33:45] Speaker 04:
Other questions?

[00:33:46] Speaker 05:
Thank you very much.

[00:33:47] Speaker 05:
Thanks to both counsel for your argument.

[00:33:50] Speaker 05:
The case just argued is submitted.