Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-02430/USCOURTS-azd-2_04-cv-02430-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

James D. Murphey, 

Plaintiff, 

vs.

TPS Enterprises, an Arizona general

partnership; Patrick J. Simeri and Pier

Simeri, husband and wife; Thomas L.

Schoaf, Sr. and Shirley A. Schoaf,

husband and wife; Creative Products, Inc.,

an Arizona corporation; and Adapto, Inc.,

an Arizona corporation, 

Defendants. 

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No. CIV 04-2430-PHX-MHM

ORDER

Currently before the Court is Defendants TPS Enterprises, Patrick and Pier Simeri,

Thomas and Shirley Schoaf, Creative Products, Inc., and Adapto Inc.’s (“Defendants”)

Motion for Summary Judgment (Dkt.#37); Plaintiff James D. Murphey’s (“Plaintiff”) Cross

Motion for Summary Judgment (Dkt.#42-2); and Defendants’ Motion to Strike. (Dkt.#55-2).

After reviewing the papers and the record and finding oral argument to be unnecessary, the

Court issues the following Order. 

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1

Plaintiff is currently proceeding pro se, but for the majority of the litigation was

represented by counsel who was granted leave to withdraw on June 13, 2007 based upon his

transition to the public sector. (Dkt.#64). 

2

 The Court has also received and appropriately considered Plaintiff’s “Supplement

Reply to Defendants’ Motion to Strike Cross-Motion for Summary Judgment” filed on

August 8, 2007. (Dkt.#72). 

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I. Procedural History

On November 5, 2004, Plaintiff filed his initial complaint in this Court. (Dkt.#1).1

On February 2, 2006, after the Court’s Rule 16 Fed.R.Civ.P. Scheduling Conference, the

Court, upon the Parties’ stipulation, permitted Plaintiff to file his Third Amended Complaint

(the “Complaint”). The Complaint alleges one claim of patent infringement pursuant to 35

U.S.C.A. § 271 against the Defendants. Plaintiff specifically alleges that the Defendants

have infringed Plaintiff’s United States Letters Patent No. 5,780,842 (the “‘842 Patent”)

entitled “Item Dispensing Control System for Use in Vending Devices” (the “Letters Patent”)

as well as Plaintiff’s “Trigger Circuit” invention to which a patent application was filed (the

“Trigger Circuit Invention”). (Complaint ¶ 13). After a full discovery period, the

Defendants filed the instant Motion for summary judgment challenging the validity of

Plaintiff’s claim. The Motion is fully briefed and ripe for this Court’s consideration.2

II. Factual Background 

Plaintiff is the inventor of a unique snowcone machine to which the Letters Patent and

the Trigger Circuit Invention derive. In the Fall of 1998, Plaintiff, along with two

individuals, Marvin Crater and Eugene Walker, met with Defendant Patrick Simeri regarding

the manufacture of Plaintiff’s snowcone vending machine by Defendant Creative Products,

Inc. (“Creative Products or “CPC”). Defendant Simeri and co-Defendant Thomas Schoaf are

members and owners of Defendant Creative Products, Inc. Shortly thereafter, the Parties

entered into negotiations regarding the manufacture of the machines. On November 6, 1998,

Plaintiff and Defendant TPS Enterprises (“TPS” or “TPS Enterprises”), a general partnership

formed by Defendants Simeri and Schoaf, entered into an “Exclusive License Agreement”

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regarding Plaintiff’s Letters Patent and Trigger Circuit Invention. Specifically, the Exclusive

License Agreement granted TPS the rights to manufacture and/or sell such technology by

providing in pertinent part:

LICENSOR hereby grants to LICENSEE the exclusive right and license to

make, have made, use, sell, and offer for sale apparatus covered by a VALID

CLAIM of said LICENSES PATENTS in the United States, . . . 

(DSOF ¶ 6). 

The Exclusive License Agreement also contemplated that Plaintiff’s technology could

be sub-licensed to third parties as well. Notably, the Agreement provided compensation to

Plaintiff as the Licensor in the form of 30% of gross revenue earned on all sub-licenses as

well as 10% of all gross revenue earned on all manufactured products sold by the TPS.

(DSOF ¶ 7). The Exclusive License Agreement also provided for the assignment of TPS’

rights. (DSOF ¶ 9). Moreover, the Exclusive License Agreement gave Plaintiff the right to

terminate the agreement if Plaintiff did not receive at least $18,000 in royalties in the first

calendar year after execution of the agreement. (DSOF ¶ 11). After the Exclusive License

Agreement was executed, TPS engaged in discussions with third-party manufacturers

regarding the sale, manufacture and sub-license of Plaintiff’s inventions. During such

discussions with third-parties regarding Plaintiff’s technology, Defendants offered nondisclosure agreements to protect against disclosure of Plaintiff’s technology. In one such

non-disclosure agreement, Defendant Creative Products rather than “TPS Enterprises” was

identified as the licensee of Plaintiff’s technology. In another such agreement with a thirdparty, “TPC Enterprises” rather than “TPS Enterprises” was identified as the licensee.

Despite efforts regarding business opportunities involving Plaintiff’s technology, no

agreements or sales were made generating revenue. As such, by January 1, 2000,

approximately one year after the Exclusive License Agreement was executed, there had been

no sales of Plaintiff’s licensed products and thus no royalties earned by Plaintiff under the

Agreement. In a letter dated on January 4, 2000, Defendant Simeri disclosed to Plaintiff that

“no sales [had been made] of any item covered by the patent or license” and that Plaintiff,

pursuant to the terms of the Mutual License Agreement, had the right to terminate the

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Agreement. (DSOF ¶20). Defendant Simeri sent another letter to Plaintiff on March 3, 2000,

advising again the lack of any sales as well as recommending that Plaintiff offer the invention

to another company. (DSOF ¶21). On June 26, 2000, Plaintiff entered into a new license

agreement with his partner Mr. Crater and on October 24, 2000, in a letter to Defendants

Schoaf, Simeri and TPS Enterprises, Plaintiff terminated the Exclusive License Agreement.

(DSOF ¶ 24). 

On February 20, 2002, Plaintiff filed a complaint in Maricopa County Superior Court

against Defendants TPS Enterprises, Patrick and Jane Doe Simeri and Thomas and Jane Doe

Schoaf asserting claims of breach of contract and misrepresentation. (DSOF ¶ 29). Plaintiff

alleged that these Defendants breached the Exclusive License Agreement by failing to

actively pursue the production of a prototype and the manufacture of the Plaintiff’s product.

(DSOF ¶ 29). With respect to Plaintiff’s breach of contract claim, the Superior Court, in

granting summary judgment for the Defendants stated:

[A]s Plaintiff himself concedes, there was no requirement in the parties’

Exclusive License Agreement that Defendants manufacture and/or market the

inventions. . . . A reasonable juror simply could not find that Defendants

breached the Exclusive License Agreement or their covenant of good faith and

fair dealing by failing to do something the Agreement did not require them to

do - make, have made, use, sell, or offer for sale Plaintiff’s inventions. . . . 

The Superior Court further noted in a footnote:

The Agreement expressly permitted Defendants to enter into sublicenses and

assign all of their rights and obligations under the Agreement to a third-party

without the prior approval of Plaintiff. This further establishes that the

Agreement did not obligate Defendants to manufacture and/or market

Plaintiff’s inventions. 

(DSOF ¶ 31). 

Final judgment was entered in the Superior Court case on December 9, 2004, and

Plaintiff did not appeal. (DSOF ¶ 32). 

III. Summary Judgment Standard

 A motion for summary judgment may be granted only if the evidence shows "that

there is no genuine issue as to any material fact and that the moving party is entitled to

judgment as a matter of law." Fed.R.Civ.P. 56(c). To defeat the motion, the non-moving

party must show that there are genuine factual issues "that properly can be resolved only by

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a finder of fact because they may reasonably be resolved in favor of either party." Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511 (1986). The party opposing

summary judgment "may not rest upon the mere allegations or denials of [the party’s]

pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial."

Rule 56(e). See Matsushita Elec. Indus. Co., v. Zenith Radio Corp., 475 U.S. 574, 586-87

106 S.Ct. 1348 (1986). The evidence must be viewed in the light most favorable to the

nonmoving party. Devereaux v. Abbey, 263 F.3d 1070, 1074 (9th Cir. 2001) (en banc). 

IV. Analysis 

Defendants assert that summary judgment on Plaintiff’s patent infringement claim is

appropriate because Plaintiff is essentially relitigating the case that he lost before the

Superior Court and is thus barred by principles of collateral estoppel. In addition,

Defendants contend that the Exclusive License Agreement acts as a complete affirmative

defense to Defendants’ possession and use of the Plaintiff’s Patents during the Exclusive

License Agreement period. Moreover, Defendants argue that there is no evidence that the

Defendants used or somehow infringed Plaintiff’s Patents or technology after Plaintiff

terminated the Agreement. In opposition, Plaintiff disputes that he is relitigating the breach

of contract and misrepresentation claims he lost before the Superior Court. In addition,

Plaintiff asserts that because he was fraudulently induced into entering the Exclusive License

Agreement it should be given no effect and thus Defendants’ use of the Patents during the

Agreement period constitutes infringement. Moreover, Plaintiff asserts that even if the

Exclusive License Agreement is not rescinded by the Court, there is still sufficient evidence

to suggest infringement by the Defendants. 

A. Evidence Regarding Infringement of Plaintiff’s Patents

In order to prove infringement of Plaintiff’s Patents, despite the existence of the

Exclusive License Agreement, Plaintiff offers two theories. First, Plaintiff claims that the

“Defendants fraudulently induced Plaintiff to enter into the Exclusive License Agreement

that should therefore be rescinded.” (Plaintiff’s Response, p.7). Plaintiff states that in the

absence of the Exclusive License Agreement, the Defendants infringed Plaintiff’s patented

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technology by using them without permission. Second, Plaintiff asserts that regardless of

whether the Exclusive License Agreement is rescinded, infringement can be found because

of the use of the Patents by non-parties to the Exclusive License Agreement such as

Defendant Creative Products, Inc., and non-party TPC. (Plaintiff’s Response, p.7). 

(1) Fraudulent Inducement

First, with regards to Plaintiff’s fraudulent inducement theory regarding the Exclusive

License Agreement, such a claim was not raised in Plaintiff’s Complaint before the Court.

Rather, Plaintiff’s Complaint asserts only that the Defendants committed patent infringement

based upon Defendants continued infringement in the Letters Patent and Trigger Invention.

(Complaint ¶ 13). There is no claim that the Exclusive License Agreement should be

rescinded for fraudulent inducement by the Defendants. In the absence of such a claim,

Plaintiff’s claim is waived. See London v. Coopers & Lybrand, 644 F.2d 811, 814 (9th Cir.

1981) (deeming claim not raised in amended complaint waived); see also Rule 8(a)

Fed.R.Civ.P. 

In addition, even if this claim challenging the validity of the Exclusive License

Agreement before this Court was properly presented, the claim still fails based upon the

evidence presented upon summary judgment. Plaintiff’s theory regarding the alleged

fraudulent inducement by Defendants is based upon Plaintiff’s speculative statements and

conjecture and is simply not supported by any admissible evidence. For instance, in support

of Plaintiff’s fraudulent inducement theory, Plaintiff cites as evidence an unsigned nonuniform interrogatory response detailing a lengthy recitation of his theory of the case,

including that Defendants never intended to manufacture Plaintiff’s product and fraudulently

induced Plaintiff to enter the Exclusive License Agreement. (PCSOF ¶ 34; Plaintiff’s

Response, pp. 7-8). This interrogatory response appears to be nothing more than attorney

argument and is not in any way evidence to generate a genuine issue of material fact

suggesting that the Exclusive License Agreement should be rescinded. See United States v.

White, 366 F.3d 291, 300 (4th Cir. 2004) (“[A]n attorney’s unsworn argument does not

constitute evidence . . .”). Moreover, a significant amount of the non-uniform interrogatory

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response appears to be based upon self-serving affidavits offered by Plaintiff and his business

partner, Mr. Eugene Walker. For instance, Plaintiff offers his declaration making statements

such as: (1) “[o]nly after Defendants decided not to manufacture the Snowcone Machine and

Vending Machine (but instead “lock up” Plaintiff’s Patents by obtaining exclusive rights to

them with the Exclusive License Agreement, then reverse engineer them . . . and avoid

paying Plaintiff any money) on October 9, 1998 . . . were applications of Plaintiff’s Patents

other than the Snowcone Machine and vending-related products discussed;” and (2)

“Defendants having ‘locked-up’ Plaintiff’s Patents by fraudulently inducing Plaintiff to enter

into the Exclusive License Agreement, Defendants set about to reverse engineer and exploit

Plaintiff’s Patents . . . and avoid paying Plaintiff money.” (PSOF ¶¶ 10,11, 18) (emphasis in

original). Mr. Walker’s declaration makes virtually the same statements in his declaration to

suggest the existence of some type of fraud by the Defendants with respect to the execution

of the Exclusive License Agreement. (PSOF ¶ 10, 11, 18). However, such statements are

made without any degree of foundation or support and are not somehow suggestive of the

existence of fraudulent inducement with respect to the Exclusive License Agreement. See

Skillsky v. Lucky Stores, Inc., 893 F.2d 1088, 1091 (9th Cir. 1990) (“[T]estimony that is not

based on personal knowledge is hearsay is inadmissible and cannot raise a genuine issue of

material fact sufficient to withstand summary judgment.”); see also British Airways Board

v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 1978) (nonmoving party cannot rely on speculation

or conjecture in meeting its burden of production). 

Additionally, Plaintiff’s suggestion of fraud based upon the draft license agreement,

which involved Plaintiff and Defendant CPC, and the final Exclusive License Agreement,

which involved Defendant TPS Enterprises, is not credible evidence of fraud. According

to Plaintiff, this change from Creative Products to TPS was made to show Plaintiff’s “true

intentions.” (Plaintiff’s Response, pp.4-5). Again, Plaintiff offers only speculation. Further,

Plaintiff points out that after the Exclusive License Agreement, the Defendants contacted

multiple engineers and companies regarding Plaintiff’s patents allegedly to “exploit” them.

(Id. p.5). However, this conduct of contacting third-parties regarding Plaintiff’s technology

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is clearly authorized by the Exclusive License Agreement and is not indicative of fraud.

Finally, Plaintiff identifies that two of the non-disclosure agreements with third-parties

regarding Plaintiff’s Patents identified either Defendant CPC rather than TPS Enterprises and

TPC rather than TPS Enterprises as the licensees of Plaintiff’s Patents. However, that fact

does not somehow suggest the existence of fraud by TPS Enterprises or any other Defendant

during the execution of the Exclusive License Agreement. As noted above, at best, Plaintiff

offers speculation and conjecture, which is not evidence at the summary judgment stage. See

British Airways, supra

In rejecting Defendant’s newly raised fraudulent inducement claim in support of his

patent infringement claim, the Court finds it relevant to note that Plaintiff did not offer any

such claim or theory before the Superior Court when Plaintiff sought to enforce the terms of

the Agreement to which Plaintiff now claims was fraudulently induced. Moreover, the

Superior Court, upon summary judgment, rejected Plaintiff’s misrepresentation claim that

was based, in part, upon Plaintiff’s allegation that the Defendants’ misrepresented their intent

to manufacture the Snowcone machine and development of any prototype. (DSOF ¶ 31,

Exhibit K). The Superior Court noted that “the Agreement did not obligate Defendants to

actively pursue the manufacturing of [Plaintiff’s] inventions.” (Id.). Thus, to the extent

Plaintiff claims fraudulent inducement upon the Defendants’ inactivity regarding

manufacturing or selling the Plaintiff’s inventions, that argument is misplaced. 

As such, there is simply no basis to find the existence of fraudulent inducement to

remove the binding impact of the Exclusive License Agreement. No such claim was

presented to this Court and there is no admissible evidence to support it. 

(2) Evidence Regarding Infringement

The Court’s finding regarding the absence of fraudulent inducement surrounding the

Exclusive License Agreement is significant as it essentially bars any claim of infringement

regarding Defendants’ use of the Plaintiff’s Patents during the Exclusive License Agreement

period. See McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920 (Fed. Cir. 1995) (“A

licensee, of course, has an affirmative defense to a claim of patent infringement.”). In other

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words, to the extent Plaintiff claims that the Patents were infringed during the period of the

Agreement, November 6, 1998, through October 24, 2000, Plaintiff’s claim fails as the use

of the technology by TPS Enterprises was authorized under the terms of the Agreement.

Moreover, with respect to the other named Defendants in this case, Plaintiff’s deposition

testimony establishes that Plaintiff has not credible claim of patent infringement against

them. Specifically, during Plaintiff’s deposition he expressly stated that none of the

Defendants’ infringed the Patents. (DSOF ¶39). In fact, it appears that the only evidence

that Plaintiff points to with respect to infringement is the existence of two separate nondisclosure agreements entered into with third-party Wave Systems Integration, LLC and

third-party Rose Wang. (PCSOF ¶ 25). As noted above, with respect to the Wave Systems

non-disclosure agreement, which Plaintiff contends was not required for confidentiality

purposes, Plaintiff notes that the agreement identifies Defendant Creative Products as the

licensee rather than TPS Enterprises. Similarly, the Wang disclosure agreement identifies

TPC Enterprises, rather than TPS Enterprises as the licensee. (Id.). Plaintiff argues that the

fact that entities other than TPS Enterprises, the entity identified in the Exclusive License

Agreement, demonstrates that Defendants induced the infringement of Plaintiff’s Patents.

Again, however, this argument amounts to speculation and conjecture. Notably, Creative

Products, Inc., is operated by the same individuals as TPS Enterprises, and located at the

same address. In addition, Defendant Schoaf testified that the form used for the nondisclosure agreement with Wave Systems is a standard form used by Creative Products, Inc.,

and that it was a mistake not to change the licensee to TPS Enterprises. (DSOF ¶28).

Defendant Schoaf also testified that it was a typographical mistake in the Wang nondisclosure form with respect to thus of TPC Enterprises rather than TPS Enterprises. (Id.).

This testimony, the circumstances surrounding the non-disclosure forms and the speculative

allegation by Plaintiff that such errors induced the infringement, justify the Court’s finding

the non-disclosure forms do not suggest infringement of Plaintiff’s Patents. Plaintiff, other

than relying on the face of the non-disclosure agreements, does not offer any evidence

suggesting that Creative Products or any other entity infringed Plaintiff’s Patents. 

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Accordingly, the Court finds that Plaintiff fails to offer any credible evidence suggesting

infringement of Plaintiff’s Patents during the Agreement period. 

In addition to the lack of any infringement by Defendants during the Agreement

period, Defendant fails to offer any evidence suggesting infringement by Defendants

subsequent to the Agreement period. In fact, Plaintiff’s deposition testimony makes clear

that no such evidence is presented. When questioned regarding Plaintiff’s own allegation in

the Complaint regarding continued infringement by the Defendants, Plaintiff stated that the

allegation was not accurate after October 24, 2000, the date of formal termination of the

Agreement by the Plaintiff. (DSOF ¶36). As such, in the absence of any such continued

infringement, Plaintiff’s patent infringement claim fails with respect to the period subsequent

to the termination of the Exclusive License Agreement. 

Thus, the Court finds that there is no evidence suggesting infringement of Plaintiff’s

Patents by the Defendants. 

(3) Collateral Estoppel

Lastly, the Court finds that the basis of Plaintiff’s patent infringement action is barred

by principles of collateral estoppel resulting from the prior Superior Court judgment rendered

against Plaintiff in his breach of contract and misrepresentation case against many of the

same Defendants named in this suit. Collateral estoppel binds a party to a decision on an

issue litigated in a previous lawsuit if the following factors are met: “(1) the issue was

actually litigated in the previous proceeding, (2) the parties had a full and fair opportunity

and motive to litigate the issue, (3) a valid and final decision on the merits was entered, (4)

resolution of the issue was essential to the decision, and (5) there is a common identity of the

parties.” Campbell v. SZL Properties, Ltd., 204 Ariz. 221, 223 (Ariz.App. 2003) (citation

omitted). When collateral estoppel is used defensively, i.e., when a defendant seeks to

prevent a plaintiff from asserting a claim already unsuccessfully litigated, and the first four

elements are satisfied, Arizona does not require a finding of a common identity of the parties.

Id. In the instant case, collateral estoppel applies to the majority of Plaintiff’s case at it is

essentially a second bite at the apple regarding Plaintiff’s claim of breach of contract asserted

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in the Superior Court litigation. For instance, at Plaintiff’s deposition, when asked how the

Defendants infringed Plaintiff’s Patents, Plaintiff responded “[t]hey just promised to perform

- to manufacture and sell the apparatuses and never did so from Day One. They went straight

into offering them to other people. And then they said they didn’t intend to manufacture it

from the start.” (DSOF ¶ 41). In addition, in Plaintiff’s non-uniform interrogatory response,

heavily relied upon by Plaintiff, it is further stated that “TPS and other Defendants

represented to Murphey that, after gearing-up, TPS would manufacture Apparatuses.

Furthermore, after execution of the License, TPS and other Defendants never represented to

Murphey that they were not manufacturing Apparatus. This is because, by their own

admissions, Defendants never intended to manufacture Apparatus.” (PCSOF ¶ 34)).

However, even assuming these allegations to be true, the Superior Court already reviewed

and adjudicated this issue. In rejecting Plaintiff’s breach of contract claim, the Superior

Court stated “there was no requirement in the parties’ Exclusive License Agreement that

Defendants manufacture and/or market the inventions.” (DSOF ¶ 31). The Superior Court

further noted that “[t]he Agreement expressly permitted Defendants to enter into sublicenses

and assign all of their rights and obligations under the Agreement to a third party without the

prior approval of Plaintiff. This further establishes that the Agreement did not obligate the

Defendants to manufacture and/or market Plaintiff’s inventions.” (Id.). Thus, to the extent

Plaintiff again asserts that the Defendants were required to take certain actions under the

Exclusive License Agreement, such claims are clearly barred as the issue has been fully and

fairly litigated to a final decision on the merits and thus barred by collateral estoppel. 

V. Summary

Plaintiff’s patent infringement claim fails upon summary judgment review. There is

simply no basis to rescind the Exclusive License Agreement signed by Plaintiff on the basis

of fraud in the inducement. As a result, there is no evidence of patent infringement during

the term of the Agreement. In addition, Plaintiff fails to offer any evidence suggesting

infringement by the Defendants after the Agreement’s termination. Finally, all, or at least

a substantial portion, of Plaintiff’s suit is barred by collateral estoppel as the issue regarding

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Plaintiff’s Cross-Motion for summary judgment is essentially Plaintiff’s response to

Defendant’s Motion for summary judgment. Plaintiff offers no specific or credible argument

in support of the granting summary judgment for the Plaintiff. Because the Court finds that

summary judgment, with the benefit of Plaintiff’s response, is appropriate, the Court will

simply deny as moot Plaintiff’s cross-motion. 

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Defendants’ actions or inaction under the Agreement has been fully and fairly litigated to a

final judgment in prior litigation. 

Accordingly,

IT IS HEREBY ORDERED granting Defendants’ Motion for Summary Judgment.

(Dkt.#37). 

IT IS FURTHER ORDERED denying as moot Plaintiff’s Cross-Motion for

Summary Judgment. (Dkt.#42-2).3

IT IS FURTHER ORDERED denying as moot Defendants’ Motion to Strike

Plaintiff’s Cross-Motion for Summary Judgment. (Dkt.#55-2). 

IT IS FURTHER ORDERED directing the Clerk to enter judgment accordingly.

DATED this 18th day of September, 2007.

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