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EMC is sometimes referred to by Plaintiffs as EMCT.David C. Larkin #006644DAVID C. LARKIN, P.C.4645 South Lakeshore Drive, Suite 6Tempe, Arizona 85282Telephone (480) 491-2900Fax (480) 755-4825Attorney for Defendant RespondentsErik Zeiner, Andrea McCoy, Kenneth McCoy,Nichole Malero, and Marco Arce

UNITED STATES DISTRICT COURTDISTRICT OF ARIZONA

Thomas & Kristina Petersen; and

Securityminded Technologies, LLC,

Plaintiffs/Claimants,vs.EMC Telecom Corporation, et al.Defendants/Respondents.No.

2:09-cv-02552-GMS

REPLY ON NONSIGNATORYDEFENDANTS’ MOTION TODISMISS

Non-Corporate Defendants Erik Zeiner, Andrea McCoy, Kenneth McCoy, NicholeMalero, and Marco Arce (the “Defendant Nonsignatories”) hereby reply to plaintiffs’response to Defendant Nonsignatories’ Motion to Dismiss the Petition to Compel Arbitration.

I.THE PETITION SHOULD BE DISMISSED BECAUSE PLAINTIFFS HAVECITED NO AUTHORITY FOR COMPELLING ARBITRATION ONNONSIGNATORIES WHERE PARTY SEEKING TO COMPEL HASEXPRESSLY AGREED THAT THIRD PARTIES ARE NOT OBLIGATED TOARBITRATE.

Defendant Nonsignatories moved to dismiss the petition to compel on the grounds thatplaintiffs are equitably estopped from compelling Defendant Nonsignatories to arbitrate bythe plain language of the Asset Purchase Agreement (“APA”) between Plaintiffs and EMCTelecom Corporation (“EMC”)

attached as Exhibit 1 to the Petition to Compel Arbitration(filed pages11 of 59 through 52 of 59). The APA expressly provides that no one, other than

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The second of two “Section 36.1" on page 22 of the APA-2-the parties, is intended to be obligated or liable “under or by reason of this Agreement.”[Petition, Exhibit 1 APA Section 36.1

(Second), p. 22 and p. 34 of 59 as filed].APA Section 36.1 (Second) provides in pertinent part:“. . . Nothing in this Agreement, expressed or implied, is intended to confer onany Person other than the parties hereto or their respective permittedsuccessors and assigns, any rights, remedies, obligations or liabilities under orby reason of this Agreement.”[Petition, Exhibit 1, p. 22 and p. 34 of 59 as filed].Thus, Plaintiffs expressly agreed that no person other than the parties to the APAwould be subject to any obligation under or by reason of the APA, including therefore, anyobligation to arbitrate. Plaintiffs are therefore estopped from asserting the arbitrationprovision against the Defendant Nonsignatories who are not parties to the APA. “[E]quitableestoppel applies when the signatory to a written agreement containing an arbitration clausemust rely on the terms of the written agreement in asserting its claims against thenonsignatory.”

Oceantrade S.A. v. Nuttery Farms, Inc

. 2005 WL 3299716, 2 (N.D.Cal.2005) (quoting

Fujian Pac. Elec. Co. Ltd. v. Bechtel Power Corp

., C 04-3126, 2004 WL2645974, *5 (N.D.Cal. 2004). Plaintiffs seek to enforce an a contractual obligation toarbitrate in the APA against the Defendant Nonsignatories who did not sign the APA and arenot parties to the contract, despite plaintiffs’ express agreement that only parties, plaintiffsand the corporate purchaser, EMC, are obligated or liable under the Agreement.Plaintiffs’ response makes general remarks concerning authority, cited in itsmemorandum of points and authorities filed with the Petition, for compelling arbitration withnonsignatories. However, none of the cases cited by plaintiffs found that nonsignatories toa contract containing an arbitration agreement could be compelled to arbitrate where thecontract also contained an express agreement that third parties, like the DefendantNonsignatories, will not be obligated under the agreement. . “Plaintiff[s] cannot wish awaythe provisions it dislikes from the very contracts it seeks to enforce.”

Oceantrade S.A. v.

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Nuttery Farms, Inc

. 2005 WL 3299716, 2 (N.D.Cal. 2005). Accordingly, the non-partyDefendant Nonsignatories are not obligated to arbitrate under the express terms of thecontract and Plaintiffs are further equitably estopped from asserting any right to impose anobligation on Defendant Nonsignatories to arbitrate pursuant to the APA.Plaintiffs have cited no contrary authority compelling a nonsignatory to arbitratewhere the party seeking to compel expressly agreed that no third party was obligated by theagreement to arbitrate and plaintiffs are therefore estopped from attempting to compel as amatter of law. Accordingly, the Court should dismiss the petition to compel.

II.EVEN IF PLAINTIFFS ARE NOT ESTOPPED, ON THE RECORD BEFORETHE COURT, THE ALLEGATIONS IN THE DEMAND FOR ARBITRATIONARE INSUFFICIENT TO COMPEL NONSIGNATORIES TO ARBITRATE.

The allegations that plaintiffs rely on to compel the Defendant Nonsignatories toarbitrate are mere allegations without substance. Nevertheless, plaintiffs are asking this courtto require persons who did not agree to arbitrate to lose their rights to the benefits of a Courtof law, including their constitutional right to a jury trial, based upon their mere allegations.

A.Plaintiffs Cannot Compel Defendant Nonsignatories to Arbitrate byPiercing the Corporate Veil

Plaintiffs seek to compel Defendant Nonsignatories to arbitrate based upon a piercingof the corporate veil, as set forth in the general allegations in paragraph 17 of the Demandfor Arbitration as follows:17.Upon information and belief, Petersons and SMT allege thatEMCT conducted business in a manner that justifies the piercing of itscorporate veil and the imposition of liability for all claims in this manner uponall of its officers, directors and shareholders, including Eric Zeiner, AndreaMcCoy, Kenneth McCoy, Nichole Malero, and Marcos Arce.[Petition, Demand for Arbitration, p. 8 of 59 as filed].In order for this Court to pierce the corporate veil and compel arbitration, plaintiffsmust provide sufficient facts to prove those allegations to pierce the corporate veil becausethe basis for compelling arbitration in this case is the piercing of the veil itself, such that thenonsignatories stand in the place of the corporation as alter ego. Thus, in order to pierce theveil and compel arbitration, the Court cannot rely on mere allegations.

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