IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

FUNDSXPRESS FINANCIAL NETWORK, INC.,
Plaintiff,

v.

DIGITAL INSIGHT CORPORATION,
JOHN DORMAN,
VINCENT BRENNAN,
RONALD GOFFMAN,
ERIC EDWARDS and
STEPHEN CRAIN,
Defendants.

PLAINTIFF FUNDSXPRESS FINANCIAL NETWORK, INC.'S OPPOSITION TO
DEFENDANTS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR RELIEF
PURSUANT TO RULE 12(b)(6)

TO THE HONORABLE SAM SPARKS:

FundsXpress Financial Network, Inc. ("FundsXpress") responds to
defendants' Rule 12(b)(6) motion as follows:

INTRODUCTION

If a person steals goods in Texas and receives those stolen goods in
California, he has violated both states' laws and is liable under both
states' laws. Nothing limits this Court from considering both
violations, though based upon different state law, in a single
lawsuit, just as nothing prevents this Court from deciding claims
based upon state and federal statutes in the same lawsuit.

Defendants, however, seek to have this Court eliminate all claims in
FundsXpress's Complaint that are based on any state's law other than
Texas law.[1] The RESTATEMENT (SECOND) CONFLICT OF LAWS adopted by
Texas does not so limit this Court.

Specifically, defendants want this Court to dismiss FundsXpress's
Counts II and III because they are alleged under California, not
Texas, law. Defendants say they are asking the Court to dismiss Count
VII - FundsXpress's defamation claim - in the introduction to their
motion, although the motion, itself, does not specifically request
Count VII's dismissal and the memorandum in support of the motion asks
that all nine counts of plaintiff's Second Amended Petition be
dismissed rather than merely Count VII. If defendants intended to move
for dismissal of Count VII and merely forgot to include it in their
motion, FundsXpress has filed a Third Amended Complaint that should
resolve defendants' concern about the defamation claims.

None of these arguments, however, have merit under either complaint
and defendants' motion should be denied.

ARGUMENT

I. Applicable Law Is Not Limited To One State In This Lawsuit.

Texas resolves its conflict of laws by the RESTATEMENT (SECOND) OF
CONFLICT OF LAWS "most significant relationship' test. See RESTATEMENT
(SECOND) OF CONFLICT OF LAWS SS 6. 145 )1971; Hughes Wood Products,
Inc. v. Wagner, 18 S.W.3d 202, 205 (Tex. 2000). Texas has specifically
adopted SS 6 and 145 as setting forth the Texas choice of law
analysis. See Gutierrez v. Collins, 583 S.W.2d 312, 318
(Tex. 1979). Section 145(1) states that the rights and liabilities of
the parties "with respect to an issue in tort are determined by the
local law of the state which, with respect to that issue, has the most
significant relationship to the occurrence and the parties under the
principles stated in S 6. RESTATEMENT (SECOND) OF CONFLICT OF LAWS S
145(1)(emphasis added). Texas cases agree that the analysis must be
issue by issue, rather than a global determination. See Spence
v. Glock, Ges.m.b.H., 227 F.3d 308, 311-12 (5th Cir. 2000) ("Texas
also requires that a choice of law determination be done on an issue
by issue basis.") citing Duncan v. Cessna Aircraft Co., 665 S.W.2d
414, 421 (Tex. 1984).

Our lawsuit concerns multiple claims and issues; this Court,
therefore, must determine what state's law has the most significant
relationship to each issue under the principles of SS 6 and 145. If
the Court analyzes each issue, it logically follows that the answer
for these multiple analyses may differ. And, of course, they often
do. As comment d to S 145 says, "courts have long recognized that they
are not bound by decide all issues under the local law of a single
state." RESTATEMENT (SECOND) OF CONFLICT OF LAWS S 145, comment
d. This should end the discussion about whether Texas and California
law can be involved in the same lawsuit.

In an abundance of caution, however, plaintiffs will go through the
analysis of the most significant relationships that FundsXpress knows
to date between California and the issues that the defendants have
raised.[2]

II. Counts II and III Have Their Most Significant Relationship To California.

Count II states a claim for misappropriation of trade secrets under
California law. Plaintiff has also stated claims for misappropriation
of trade secrets under Texas law. Defendants violated the laws of both
states and incurred liability under the laws of both states. Count III
states a claim for receiving, concealing, and use of stolen
property. Defendants incurred liability under the California statute
for these acts. FundsXpress is not required to go to California and
file a second lawsuit to assert these claims.

Section 6 sets out the general factors relevant to the choice of law:

   (a) the needs of the interstate and international systems,

   (b) the relevant policies of the forum

   (c) the relevant policies of other interested states and the
   relative interest of those states in the determination of the
   particular issue,

   (d) the protection of justified expectations,

   (e) the basic policies underlying the particular field of law;
   certainty, predictability, and uniformity of result, and

   (f) ease in the determination and application of the law to be
   applied.

Section 145 contains the factual matters to be considered when
applying these principles to a tort case. These factual matters
include:

   (a) the place where the injury occurred,

   (b) the place where the conduct causing the injury occurred,

   (c) the domicile, residence, nationality, place of incorporation
   and place of business of the parties, and

   (d) the place where the relationship, if any, between the parties
   is centered.

Although discovery in this case has not progressed to the point at
which a complete determination can be made as to the most significant
contacts are with regard to each issue involved, this is what
FundsXpress knows about defendants' significant contacts with
California for purposes of Count II and Count III. Digital Insight has
its corporate headquarters in California and defendant John Dorman,
Digital Insight's Chairman of the Board and President, resides in
California. Digital Insight posts competitive information is regularly
posted to help its sales staff convince financial institutions to deal
with Digital Insight rather than its competitors. FundsXpress believes
that each individual defendant was explicitly encouraged by Digital
Insight, headquartered in California, to steal and collect whatever
confidential information they could obtain from FundsXpress in order
to enable Digital Insight to improve its market share at FundsXpress's
expense. FundsXpress knows that defendants Goffman, Crain, Edwards,
and Brennan, all acting outside of Texas but as agents of Digital
Insight, sent confidential information belonging to FundsXpress to
Defendant Dorman and Digital Insight in California for the benefit of
Digital Insight in California. The information was placed on Digital
Insight's intranet and was available to be disbursed to Digital
Insight's sales personnel and management throughout the United
States. Defendant Edwards instructed that this information be placed
on the Digital Insight intranet and Dorman knew, allowed, and ratified
the posting.

A. Count II's Most Significant Relationship Is With California.

Based upon the facts known at this stage of the litigation, the S6 and
S145 analysis for Count II, California's statute creating civil
liability for misappropriation of trade secrets, an activity that also
has criminal liability in California, shows that its most significant
relationship is with California. Both Texas and California have
interests in regulating this type of activity but California has
expressed that interest most strongly by passing both civil and
criminal statutes regulating the activity. The needs of the interstate
system are met by enforcement of either state's statute. The basic
policies underlying protection of trade secrets and the ease of
determining and applying the law are equal, whether California or
Texas law applies. As to the protection of justified expectations,
however, Digital Insight and Dorman, both of whom misappropriated
trade secrets knowing they had been obtained by improper means and
knowing that the laws of their own state forbid the activities they
were engaging in, certainly should have expected to incur liability in
California for their acts. Section 145 analysis also is clearly in
favor of applying California law: though the injury occurred in Texas,
the orchestration of the theft occurred in California, the stolen
trade secrets were sent to California and California defendants
allowed it to be placed on the intranet, two of the
defendants‹Digital Insight and John Dorman‹reside in or have
their principal place of business in California, and we believe the
evidence, when fully developed, will show the decisions encouraging
the theft were made in California. More important, California is where
the unfair advantage was gained as a result of using FundsXpress's
stolen trade secrets. FundsXpress may have been injured in Texas, but
Digital Insight gained its financial benefit from the misappropriation
in California. The misappropriation of FundsXpress's trade secrets was
instigated by a persistent policy of rewarding Digital Insight
employees who brought competitors' information to Digital
Insight. This policy was demonstrated by the eagerness with which
FundsXpress's trade secrets were welcomed by officers of Digital
Insight and placed on its intranet so that they became available to
all Digital Insight's sales and management personnel. The most
significant relationship for this claim is with California.

Defendants argue, however, that FundsXpress's choice of law provisions
in its contracts with Goffman and Crain govern the claim in Count
II. Count II is not a contract claim. It sounds in tort. FundsXpress
did not sue Goffman and Crain for violating their nondisclosure
agreements with FundsXpress under this claim. No other defendants
signed contracts with FundsXpress. FundsXpress contracts do not apply
to a choice of law analysis for Count II's tort claim.

B. Count III's Most Significant Relationship Is With California.

The analysis under SS 6 and 145 for Count III is even more clearly in
California's favor. Texas does not have an equivalent statute for
civil liability for the knowing receipt, concealment, and use of
stolen property, the basis for Count III's claim under California
Penal Code S 496(c). Texas, therefore, has not expressed a state
interest in regulating this particular issue. Again, it should not
surprise California residents who received, concealed, and eagerly
used confidential information that they knew was stolen that they
might incur liability for their acts under California law. Uniformity
of result is not an issue because there is no equivalent Texas
statute, and there is no difficulty in determining and applying
California law in this Court. While the injury occurred in Texas for
these acts, the conduct - receiving, concealing, and using stolen
property - took place in California, where the information was
received and posted on Digital Insight's intranet. That information
then became available from California for agents of Digital Insight to
use all over the United States. Digital Insight's own documents show
that Dorman and other officers at Digital Insight's California
headquarters authorized that receipt and use. These acts were centered
in California. Clearly, the most significant contacts with regard to
the issue of receiving, concealing, and using stolen property was with
California.

C. Courts Are Not Bound To Decide All Issues In A Lawsuit Under The
Local Law Of A Single State.

Because defendants have so little basis for arguing that FundsXpress
should not be allowed to claim defendants are liable for violating
California's Penal Code S 496(c) against receiving, concealing, and
using stolen property, they accuse FundsXpress of using depecage to
"legitimize a smorgasbord approach which would inure only to
FundsXpress's benefit." Defendants' Rule 12(b)(6) Motion S III,
p. 7. That seems a strange accusation on at least 2 levels. No
plaintiff ever intentionally files any claim against a defendant for
his disadvantage. And depecage is not a dirty word.

Digital Insight would have this Court believe that depecage - or to
use the English equivalent - applying the laws of more than one state
to different claims asserted in a single lawsuit - is an exotic and
rare occurrence in litigation. Interestingly enough, the case
defendants cite as supporting their argument that FundsXpress cannot
make claims based upon laws of different states in a single lawsuit -
Johnson v. Continental Airlines Corp., 964 F.2d 1059 (10th Cir. 1992)
- allowed precisely that. Johnson was a case in which Colorado law
governed liability and Idaho law governed compensatory damages. Id. at
1060. Even more interestingly, although defendants say depecage is
"seldom seen" (Defendants' Motion, S III, p. 6), their case, Johnson,
says that depecage is "widely approved."[3] Id. at 1062 n. 4. As the
Seventh Circuit noted, depecage is actually the approach embodied in
the RESTATEMENT that Texas has adopted as its choice of law rule. Ruiz
v. Blentech Corp., 89 F.3d 320, 324 (7th Cir. 1996), cert denied, 519
U.S. 1077 (1997))(allowing claims under both Illinois and California
law). In America's Favorite Chicken Co. v. Cajun Enterprises, 130 F.3d
180 (5th Cir. 1997), the Fifth Circuit considered a case involving
statutory claims under both Louisiana and California law. Cases
involving laws of multiple states often occur in other circuits. See
Fieger v. Pitney Bowes Credit Corp., 251 F3d 386, 397 n. 1 (2n~
Cir. 2001); International Adm'rs Inc. v. Life Ins. Co. of North
America, 753, F.2d 1373, 1376 n. 4 (7th Cir. 1985), Putnam Resources
v. Pateman, 958 F.2d 448 (1st Dir. R.I. 1992); Ewing
v. St. Louis-Clayton Orthopedic Group, Inc., 790 F.2d 682 (8th
Cir. 1986). Texas case law recognizes that parties in a single lawsuit
might select several forums' laws for different purposes. See
Georgetown Assoc. v. Home Federal S&L, 795 S.W.2d 252, 254 n. 1
(Tex. App. - Houston [14th Dist.] 1990 writ dismissed). Defendants'
argument that this Court must limit itself to the laws of a single
state in this lawsuit has no basis.

Even more important, the RESTATEMENT (SECOND) OF CONFLICTS OF LAW S
145 requiring an analysis issue by issue, and its comment d (courts
are not bound to decide all issues under the local law of a single
state) says this Court may consider the laws of different states if
those laws have the most significant relationship to the precise
issues involved.

If these defendants have violated both Texas and California law, then
the applicable law of each state should apply with full force to
impose liability. In a criminal context, violating the laws of
separate sovereigns does not permit the criminal party to avoid
judgment of one state by claiming that only one jurisdiction's law
applies. An exclusive application of one state's law, even in a civil
context, denies the other state's interests in having its sovereign
laws applied.

D. Determining The Applicable Law Now Is Premature.

This choice of law analysis, though sufficient to defeat the
defendants' contention that only Texas law applies to the
FundsXpress's claims, should not be construed as a final
analysis. Indeed, the suit has not progressed to the point where a
definitive choice of law analysis can be attempted. No depositions
have been taken and discovery is still in its infant stage. The exact
nature of the relationship between FundsXpress and the defendants is
not yet entirely clear, nor is there yet a complete enough picture of
the defendants' actions to determine finally what law should to be
applied. Once discovery is completed, defendants may question the
choice of law by filing a motion for summary judgment or dismissal or
address the issue at the jury charge stage. Now, however, is not the
time.

III. Defendants Did Not Ask For Dismissal Of All Nine Counts In Their
Motion

Finally, defendants stated in the first sentence of their Rule
12(b)(6) motion that they were moving the Court to dismiss Count VII
of FundsXpress's Second Amended Complaint. They do not, however, ask
that Count VII be dismissed. They argue in the memorandum supporting
their motion that all 9 counts be dismissed (Memorandum in Support of
Defendants' Motion to Dismiss for Failure to State a Claim for Relief
Pursuant to Rule 12(b)(6) S IV, pp. 78)[4] but their motion asks only
that counts two and three be dismissed and that Plaintiff's Second
Amended Complaint should be dismissed. Relief not asked for in the
motion cannot be granted.

PRAYER

FundsXpress, therefore, asks that this Court deny Defendants' Motion
to Dismiss For Failure to State a Claim for Relief Pursuant to Rule
12(b)(6) in its entirety.

[1] This argument is made despite the claims by Edwards, Dorman, and
Brennan that they are not subject to the jurisdiction of a federal
court sitting in Texas.

[2] FundsXpress notes that discovery in this lawsuit has only just
begun. FundsXpress received Digital Insight's first set of documents
on July 31, 2002. Determination of choice of law at this stage in the
litigation, therefore, is premature.

[3] Depecage is, as Johnson says, not rare: a simple Westlaw search
yielded 97 uses of the word in federal cases.

[4] That argument has already been addressed in FundsXpress's
Opposition to Defendants' Motion for a More Definite Statement
Pursuant to Rule 12 (e).


Respectfully submitted,

R. James George, Jr.
State Bar No. 07810000
David H. Donaldson, Jr.
State Bar No. 05969700
Peter D. Kennedy
State Bar No. 11296650
Nanneska N. Hazel
State Bar No. 12813500
114 W. 7th Street, Suite 1100
Austin,Texas 78701
(512) 495-1400
(512) 499-0094 (Fax)

ATTORNEYS FOR PLAINTIFF
FUNDSXPRESS FINANCIAL NETWORK, INC.

OF COUNSEL:

GEORGE & DONALDSON, L.L.P.
114 West 7th Street, Suite 1100
Austin, Texas 78701
(512) 495-1400
FAX: (512) 499-0094

WINSTEAD SECHREST & MINICK, P.C.
100 Congress Ave., Suite 800
Austin, Texas 78701
(512) 474-4330
FAX: (512) 370-2850

CERTIFICATE OF SERVICE

I hereby certify that on August 14, 2002, a true and correct copy of
the foregoing was served on counsel of record as shown below:

Barry K. Bishop
Clark, Thomas & Winters, P.C.
300 W. 6th Street, Suite 1500
Austin,Texas 78701
(via Hand Delivery)

Aaron C. Gundzik
Cotton & Gundzik, L.L.P.
725 S. Figueroa St., 34th Floor
Los Angeles, CA 90017
(via Certified Mail, Return Receipt Requested

Nanneska N. Hazel