05-16 Doc #30-1 Axxess Lawsuit

7/30/2019 05-16 Doc #30-1 Axxess Lawsuit

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EXHIBIT A

Case: 1:13-cv-01297 Document #: 30-1 Filed: 05/16/13 Page 1 of 15 PageID #:105


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UNITED STATES DISTRICT COURTDISTRICT OF ARIZONA

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nus DOCUMENT IS NOT IN PROPER FORM ACCORDINGTO FEDERAL AND/OR LOCAL RULES D PRACTICESAND IS SUBJECT TO REJECTIO Y COREFERENCE: - - ; ; ' : " 7 t : ' ; " " " " ' ; " " ~ ~ f + - 3 . . . . , . . " - - _1 Michael F. Bailey ( # 0 0 4 ~ 2 ryumberJoel W. Nomkin (#011939)2 Chad S. Campbell (#012080)

BROWN & BAIN, P.A.3 2901 North Central AvenuePost Office Box 4004 Phoenix, Arizona 85001-04005 (602) 351-8000OfCounsel6 Laurence R. Hefter. 7 Christopher P. IsaacFINNEGAN, HENDERSON, FARABOW,8 GARRETT & DUNNER, L.L.P.1300 I Street, N.W.9 Washington, D.C. 20005-3315(202) 408-4000 Phone10 (202) 408-4400 Fax

11 Attorneys for Plaintiff

A X X E S ~ TECHNOLOGIES. INC.. a Delat,tv '9916 corporation, \ . ,-

~ LODGED~ . RECEIVED _ COpy

2251 PHX ReB1718 v.

Plaintiff, VERIFIED COMPLAINT

19 ROBERT E. and YVONNE ALMBLAD,husband and wife; and LASER KEY II LP, an20 Illinois limited partnership,Defendant.

For its Complaint, Plaintiff ("Axxess"), alleges:THE PARTIES

2122232425 1. Plaintiffis a Delaware corporation with its principal place of business in26 Tempe, Arizona.



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1 2. Defendants Robert E. and Yvonne Almblad are citizens of Illinois. Rober2 Almblad was one of the founders of a predecessor ofAxxess. Yvonne Almblad is name3 as a defendant because, upon information and belief, Robert Almblad holds his assets in4 her name to shield them from creditors.5 3. Upon information and belief, defendant Laser Key II LP ("Laser Key") is a6 limited partnership organized and existing under the lawsof Illinois, with its principal7 place ofbusiness in Libertyville, Illinois. Upon information and belief, no partner or8 limited partner ofLaser Key is a citizen ofArizona.9 JURISDICTION

10 4. Defendants have caused events to occur in the DistrictofArizona out of11 which this action arises, have agreed to submit to the jurisdictionof this Court and have12 conducted business activities in this District sufficient to conferin personam jurisdiction13 on this Court.14 5. This Court has subject matter jurisdiction pursuant to 15 U.S.C. 112115 and 1125(a) and pursuant to 28 U.S.C. 1331 and 1367. Upon information and belief,16 plaintiffs and defendants also are citizens of different states. The sum or amount in17 controversy in this case exceeds the sum or value of $75,000, exclusive of interest and18 costs. Accordingly, the Court also has jurisdiction under 28 U.S.C. 1332.19 FACTUAL ALLEGATIONS20 6. Defendants claim to have developed some "revolutionary" key-duplication21 technology (the "New Technology"). Plaintiffhas had a limited opportunity to review22 some aspects of that technology, and conducted a limited field testof two vending23 -machines incorporating someof the New Technology for the purpose of determining24 whether it presented a commercially viable business opportunity. Certain agreements25 exist between plaintiffand defendants, pursuant to which plaintiff enjoys rightsof first26 negotiation and first refusal with respect to the sale or licenseofthe New Technology.

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1 7. The field tests were a near-tenn commercial failure, although Axxess2 believes that the New Technologymay have some long-tenn commercial value.3 8. On or about December 16, 1999, defendants issued a press release (the4 "Press Release"), in which defendants published a series of false andmisleading5 statements about Axxess and its product line. A copy of the Press Release, as it was6 transmitted to Axxess from one ofthe major customers ofAxxess (Wal-Mart), is attache7 as Exhibit A to this complaint.8 9. Most significantly, the Press Release deceptively appeared to be ajoint9 press release issued together by defendants and plaintiff (and a third company,

10 SunSource), which greatly multiplied the damaging effect of the statements that were11 made about Axxess and its products.12 10. The Press Release made false and disparaging statements about the13 products and business plans ofAxxess, including the following:14 A. Axxess' technology was said (apparently by Axxess itself) to be15 obsolete and inferior to defendants' New Technology.16 B. Axxess was said to be planning to replace its installed base of key-17 duplication equipment with defendants' New Technology as soon as possible, and18 was said to be engaged in discussions with defendants about how to do that.19 C. The Press Release said that existing technology, such as Axxess20 technology, exhibits a 30-50% failure rate (i.e., it produces keys that do not work),21 although defendants are well aware that the failure rate for keys made with Axxess22 equipment is less than 5%.23 D. Field tests of defendants' software were said to have been completed24 by Axxess at two Fred Meyer Stores in a vending machine model, where as the field25 tests related to commercial acceptance of the vending machine, not to analysis and26 verification of defendants' software.

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1 E. The Press Release stated that the Ne w Technology, having passed2 successful field trials, was about to go into volume production. Instead, upon3 information and belief, defendants have abandoned the product that actually was field4 .tested because the test was commercially unsuccessful. Upon information and belief,5 Defendants have neither the right no r a near-term plan to go into volume production6 for sale or license o f the Ne w Technology.7 11. Axxess an d SunSource, Inc. ("SunSource"), recently announced plans for a8 merger o f the tw o companies (the "ProposedAcquisition"), under which SunSource will9 acquire Axxess. Th e Proposed Acquisition presently is undergoing regulatory review an

10 due diligence investigation, as defendants are well aware.11 12. Knowing o f the announced acquisition by SunSource and, upon12 information an d belief, for the purpose of disrupting the proposed acquisition, defendants13 first offered (in violation o f their agreement with Axxess) to sell or license to SunSource14 the Ne w Technology, and thereafter wrote the Press Release in a wa y that assured15 SunSource would receive it.

Warburg [the largest Axxess shareholder] can take less thanthey planned [from the proposed merger with SunSource] andmake a deal with us. Sooner or later this will become clear toall parties.Upon information an d belief, Defendant's conduct toward SunSource has been an attempto interfere with the Proposed Acquisition for the purpose o f implementing that plan.

14. Defendants know ofAxxess' relationship with certain ke y customers,including Wal-Mart. Fo r the purpose o f improperly interfering with those relationships,Defendants sent bye-mail a copy o f the Press Release to Wal-Mart, and perhaps to

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13. Defendant Robert Almblad proposed in writing to an Axxess officer that:Axxess should acquire us [Laser Key], or our machine, beforewe gain any more momentum, i.e. financing, distributionagreements, and so on.

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1 others. Wal-Mart has stated to Axxess that it was misled into believing that Axxess was2 a party to the Press Release, that Axxess had tested defendants' technology in its current3 configuration and that Robert Almblad was "some sort of a partner" ofAxxess.4 15. Axxess has approximately 10,000 installations of its own patented key5 duplication technology. Its customers include substantial retail institutions as such Wal6 Mart, K-Mart and Home Depot. Axxess has invested approximately $30 million in7 placing and maintaining its patented key duplication technology in retail sites.8 16. Axxess' relationship with its customers and its proposed merger partner9 depends in large part upon the trust and goodwill that exists betWeen those customers an

10 Axxess. The false statements in the Press Release already have damaged Axxess'11 relationship with at least one major customer, and threaten its relationship with others an12 with its merger partner. Moreover, the false statements in the Press Release threaten13 irreparable injury to Axxess by disrupting the sale of its current technology to new14 customers.15 17. Unless defendants are restrained from continuing their false publicity16 campaign and are required to correct the false statements they already have made,17 plaintiffwill suffer irreparable injury.18 18. In addition, plaintiffhas been damaged by defendants' false publicity19 campaign in an amount to be proven at trial.20 19. Plaintiff and defendant Robert E. Almblad are parties to an agreement (the21 "Technology Agreement") relating to new key-duplication technology developed by Mr.22 Almblad. Pursuant to that agreement, plaintiffhas a right of first negotiation and a right23 of first refusal with respect to such technology, which Mr. Almblad must honor before he24 sells or licenses such technology or any portion of it.25 20. A present dispute exists about the rights of the parties under the26 Technology Agreement. Mr. Almblad has asserted a right to sell product incorporating

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1 technology subject to the Technology Agreement without regard to his obligations to2 plaintiffunder the Technology Agreement. He has offered to sell or license technology3 subject to the agreement to at least SunSource andWal-Mart, in derogation of plaintiffs4 rights under the Technology Agreement.5 CLAIMS FOR RELIEF6 COUNT I7 21. Defendants' statements in the Press Release misrepresented defendants'8 affiliation, connection or association with Axxess and the origin, sponsorship or approva9 by Axxess of defendants' commercial actions, in violation of 43(a) of the Trademark

10 Act of1946 (the "Lanham Act"), as amended, 15 U.S.c. 1125(a).11 22. Defendants' misrepresentations in the Press Release about Axxess and12 Axxess' technology constitute false andmisleading advertising, because they13 misrepresent the nature, characteristics and qualities ofAxxess ' products, all in violation14 of 43(a) of the Lanham Act.15 23. Axxess has suffered, and will continue to suffer, irreparable injury as a16 result of defendants' false andmisleading statements in violation of the Lanham Act.17 COUNT II18 24. Defendants' conduct in connection with the Press Release constitutes unfai19 competition in Arizona and is a violation of the common law ofArizona, by reason of20 which Axxess has suffered, and will continue to suffer, irreparable injury.21 25. Defendants' conduct has been willful, wanton and was undertaken with an22 evil mind.23 COUNT III24 26. Defendants' false and misleading press campaign denigrated the quality of25 Axxess' key duplication technology and misrepresented Axxess' business plans. The26 false statements in the Press Release were made with intent to cause harm to Axxess'

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1 business. Defendants made those statements knowing them to be false and with reckless2 disregard for the truth.3 27. Defendants' false publicity campaign constitutes product disparagement4 and trade libel in violation of the common law ofArizona, by reason ofwhich Axxess5 has suffered, and will continue to suffer, irreparable injury.6 COUNT IV7 28. Defendants made the false representations in, and thereafter publicized, the8 Press Release with full knowledge ofAxxess' business relationships with, among other9 companies, Wal-Mart, K-Mart, Home Depot and SunSource, Inc. Defendants'motive

10 was to disrupt those existing relationships and to interfere with Axxess' prospective11 business advantage with potential customers ofAxxess' products.12 29. Defendants' conduct constitutes improper interference with both current13 and prospective business relationships ofAxxess in violation of the common law of14 Arizona, by reason ofwhich Axxess has suffered, and will continue to suffer, irreparable15 Injury.16 COUNT V17 30. Plaintiff seeks a declaratory judgment against defendants Robert E.18 Almblad and Laser Key II LP (which is an entity controlled byMr. Almblad within the19 meaning of the Technology Agreement) declaring the rights of the parties under the20 Technology Agreement.21 NOW THEREFORE, Axxess prays for reliefas follows:22 A. Temporary, preliminary and permanent injunctive relief requiring23 defendants to:24 1) Cease publication and distribution of the Press Release and of any25 other false and misleading publicity or statements about plaintiff or plaintiff s26 products;

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1 2) Delete, remove and destroy any copies of the Press Release that are2 available for view by the public, whether they are available on the internet or3 otherwise;4 3) Disclose forthwith to the Court and to plaintiffthe identity of each5 and every person, web site, e-mail address and other location to which the Press6 Release or any similar misleading communication, has been sent, together with7 such information as defendants have about the further distribution by third parties8 of the Press Release or similar communication; and9 4) Promptly correct the false and misleading statements made in the

10 Press Release by transmitting in the same manner in which the Press Release was11 originally transmitted, a copy of the temporary restraining order.12 B. For money judgment in favor ofAxxess sufficient to compensate Axxess13 for the damages it has suffered and will suffer as a result of defendants' misconduct; in a14 amount sufficient to punish the defendants for their misconduct; and in an amount15 sufficient to reimburse plaintifffor its costs and attorneys' fees incurred in this case;16 C. For a declaratory judgment stating the rights and responsibilities of plaintif17 and defendants Robert E. Almblad and Laser Key II LP under the Technology18 Agreement.19 D. For such other and further relief as is just and proper.2021

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By M i f e k [ ~ ~ ) - - -Joel W. NomkinChad S. Campbell2901 North Central AvenuePost Office Box 400Phoenix, Arizona 85001-0400

Attorneys for PlaintiffOF COUNSEL

1 Dated: December/'( 2-, 1999.2 Respectfully submitted3 BROWN & BAIN, P.A.45678910

1112 Laurence R. HefterChristopher P. Isaac13 FINNEGAN, HENDERSON, FARABOW,GARRETT & DUNNER, L.L.P.14 1300 I Street, N.W.Washington, D.C. 20005-331515 (202) 408-4000 Phone

(202) 408-4400 Fax1617181920212223242526

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12

VERIFICATION

3 David M. Richards declares under penalty ofperjury under the laws of the United4 States:5 1. That he is Vice President, Sales and Service, ofAxxess Technologies, Inc.,6 which is the plain tiff in this action;

David M. Richards

facts alleged upon information and belief, he has received information that they are trueand he believes them to be true.

Executed this J ~ d a y ofDecember, 1999, in Maricopa County, Arizona.

~ ~ t L i

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2.3.

That he has read the foregoing Verified Complaint; andThat the facts alleged in the complaint are true; except that with respect to

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Sent:To:Subject:

Monday, December 20,19997:02 AM'kdharris@ axxesstech.com'; Axxess Technolo - Karen HarrisFW: Press releaseWhat's up with this?

John-----Original Message-----IE r 9 m . ~ : t ~ B l ; J , ! ~ : ; ~ 9 J ? J ~ ' r t , A i i 1 i J ) I ~ g ISMTP:alnib la d @ V < i h o o ; ' ( ; o m n ~ g , ( ~ } ~ ~ ! ~ T h \ j j ~ ' i J : ; M ~ " ' ~ : ' / ' : L ; : : t : . :Sent: . Friday, December 17, 1999 6:44 AMTo: Sandy Chapman; Jesus Garcia; Christopher Hynes; Paul Jurczak; ScottNielson; John Niznik; Crister Ringkvist; Crister flag Ringkvist; CristerRingkvist; Janusz Ruszel; Roger Sanders; Paula StudtISUbject: Press releaseLaser Key Announces New Digital SoftwareE < http://www.axxesstech.com/>LIBERTYVILLE, 111., Dec. 16 /PRNewswire/ -- Laser Key II LP announcedthatits new Laser Key 2000 digital imaging software has successfully completedfield tests and will begin serial production in the 1st quarter of 2000."Digital imaging technology is transforming the key duplication industrybymaking possible a key duplication machine that does not really duplicatekeys," said Robert Almblad, President. "Instead, the'machine takes adigitalpicture of a customer's key and compares that digital image with originalequipment manufacturers (OEM) specifications, which are stored in themachine's memory, and then reproduces an original key according to thosespecifications with a micro controller and servo motors. No human skillisinvolved. All other machines rely on the skill of an operator to tracecut akey and that is why 30% to 50% of keys don't work. Digital imaging haseliminated the human skill factor in making a key and this technology willreplace existing key cutting machines in the very near future."After testing the machine, Jonathan Taylor, formerly head of TaylorLockCompany said: "Customers can now get their keys cut and have completeconfidence that they will work, first time, every time. Just likecustomershave the confidence that their new TV will work after they take it hO,mefromthe store, so too will their Laser Key work properly. No more lock outs,nomore aggravation of returning to the store."The field tests of the software were completed by Axxess Technologiesattwo Fred Myers stores in Tempe, AI.. in a vending machine model."We chose Axxess Technology to carry out some of the first field testsbecause I was the original Founder ofAxxess in 1985, and because Axxesshas



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successfully placed my older style key cutting machine I invented 10 yearsagoin about 8,000 locations including Wal-Mart, K-Mart and Home Depot,"Almbladsaid. "Right now we are discussing the best method of replacing theseolderAxxess machines. Both Axxess and the stores that have seen the Laser Keymachine agree that they want to replace these old machines with the newdigital imaging based machines as soon as possible."According to a recent PR Newswire release, SunSource (NYSE) has agreedtoacquire Axxess and will be the new owner ofAxxess.Laser Key 1\ LP is a leading edge digital imaging Rand D firm locatedinLibertyville, IL.Axxess Technologies (http://www.Axxesstech.cbm) man ufactu res and distributeshigh-tech and conventional key duplication systems, as well as aninnovative,consumer-operated identification engraving system. Axxess is also aleadingmanufacturer of letter, numbers and signs, key accessories and emergencykeys.SunSource Inc. is one of the nation's leading providers of value-addedservices and products to retail and industrial markets in North America.ItsIndustrial Services businesses provide parts supply, engineering andrepairservices throughout the U.S., Canada and Mexico. Its Hillman Groupsubsidiaryis a leading provider to hardware outlets of merchandising systems,in-storeservice work and small parts such as fasteners, letters, signs and keys.ItsHarding Glass subsidiary operates the largest chain of full service glassshops in the U.S. .

SOURCE Laser Key \I LPWeb Site: http://www.Axxesstech.com

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Kindest personal regards,Robert AlmbladLaser Key II LP, 1840 Industrial Drive, Unit 110Libertyville, IL 60048, Voice 8478167786 Ext 14Fax 847 816 0569 E-mail address: [email protected]

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05-16 Doc #30-1 Axxess Lawsuit