Medalogix, LLC v. Alacare Home Health Services,inc.
Court Docket Sheet
Northern District of Alabama2:2015-cv-01869 (alnd)
COMPLAINT against Alacare Home Health Services,Inc., filed by Medalogix, LLC. (Filing fee paid, $400, Summons issued). [Transferred from Tennessee Middle on 10/23/2015.]
Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 1 of 10 UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION MEDALOGIX, LLC, Plaintiff, V.) Case No: ALACARE HOME HEALTH SERVICES, INC.,) Defendant COMPLAINT Plaintiff Medalogix, LLC (Medalogix ") files this Complaint for declaratory relief against Defendant Alacare Home Health Services, Inc. (Alacare) and, in support thereof, alleges the following: PARTIES, JURISDICTION AND VENUE 1. Medalogix is a limited liability company organized and existing under the laws of the State of Delaware with its principal executive office located in Nashville, Tennessee. None of the members of Medalogix resides in, or is a citizen of, the State of Alabama. 2. Alacare is a corporation organized and existing under the laws of the State of Alabama, with its domicile address located at 2400 John Hawkins Parkway, Birmingham, Alabama 35244. 3. This Court has subject matter diversity jurisdiction pursuant to 28 U. S. C. 88 2201 and 1332. 4. This Court has personal jurisdiction over Alacare because, among other reasons, this controversy arises out of information and services that Alacare provided to Medalogix in this State Case 2: 15-cv-01869-RDP Document 1 Filed 04 22/15 Page 2 of 10 pursuant to a contract to do business with Medalogix in this State. In connection with the parties' business relationship, Alacare, inter alia, sent health care records and other patient data to this State, attended meetings and software development sessions in this State, made regular phone calls to this State, participated in telephonic conferences hosted in this State and received commissions on sales made in this State. 5. Venue is appropriate in this Court pursuant to 28 U. S. C. 8 1391. FACTS 6. Medalogix is a health data analytics firm. It specializes in creating predictive analytic software and tools designed to assist home health care providers in identifying and managing patients for whom hospice care is appropriate and in deploying clinical resources so as to reduce hospital admissions among their patients. Medalogix has developed two software products that it markets and sells to clients. The Bridge " product uses predictive analytics to help home health care providers identify more quickly and accurately those patients who are ready for transfer to hospice care, which commands higher reimbursement rates from payors than do ordinary home health care services. The " Touch product uses predictive analytics to help home health care providers identify those patients who have the highest probability of needing inpatient care so that the provider can allocate the clinical resources necessary to avoid such admissions if possible. Home health care providers, of course, lose revenue when one of their patients is transferred to an inpatient facility. Like the Bridge' product, therefore, Medalogix's " Touch " product utilizes predictive analytics to help home health care agencies both increase revenues and provide a more appropriate level of care. 8. In late 2012, Medalogix's Chief Executive Officer, Dan Hogan, met Steven Waits, the Chief Clinical Officer of Alacare, at meeting of the National Association for Home Care & Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 3 of 10 Hospice (NAHC) in Orlando, Florida. That meeting led to subsequent discussions between Medalogix and Alacare about Medalogix's business and how Medalogix's predictive analytics expertise might be particularly well-suited to home health care providers, who regularly must determine, among other things, how to allocate limited clinical resources in order to minimize hospital readmissions and which patients should be transferred from home health to hospice care. Medalogix and Alacare thus began discussing how Medalogix might be able to analyze historical patient data and build predictive algorithms to help Alacare and other home health/hospice providers better predict which patients were most susceptible to readmission or ready for transfer to hospice. As a result of these discussions Alacare agreed to provide historical patient data and other information to Medalogix to help in the development and enhancement of its predictive analytics software products. On January 28, 2013, the parties formalized this agreement by executing a Services Agreement whereby Alacare agreed to provide Medalogix with access to its historical patient data in order to help Medalogix develop predictive algorithms to determine a patient's need for hospice or other palliative care. " A copy of the Services Agreement is attached hereto as Exhibit A. 10. Pursuant to the Services Agreement, Alacare provided Medalogix with historical patient data so that Medalogix could enhance its Touch product and begin developing the Bridge product. Alacare also began providing other assistance to Medalogix. For instance, on March 25, 2013, Alacare's executive management team, including its Chairman & President, John Beard, Mr Waits and other senior executives, hosted Mr Hogan and Medalogix's Chief Technology Officer Bryan Mosher, in a meeting to discuss the products that Alacare would be working on with Medalogix going forward, as well as ideas for new products and how the parties could work Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 4 of 10 together. Between January and June 2013, Alacare gave Medalogix access to its service level coordinators and other personnel involved in hospice transition decisions, and Medalogix had frequent phone calls and meetings with those personnel in order to learn how such determinations were made. Alacare also provided and educated Medalogix on its workflow procedures and on hospice referral admissions and referral processes. 11. Using the patient data and other resources that Alacare had provided to Medalogix, as well as its own expertise in predictive analytics and software development, Medalogix developed the Bridge product and continued to enhance the Touch product. Indeed, Medalogix regularly demonstrated the functionality of both products to Alacare during the development process so that Alacare could help Medalogix refine, enhance and improve the functionality and usefulness of both products, and Alacare began using the Bridge product in its business as early as July 2013. 12. Alacare recognized the value and potential of the products, and it wanted to use them in its own business and help Medalogix market them to others. Moreover, Medalogix appreciated the information that Alacare had provided during the development process, and it desired to compensate Alacare for that information. Accordingly, on October 23, 2013, the parties entered into an Addendum to the Services Agreement whereby Medalogix gave Alacare free use of the Bridge and Touch products through December 31, 2015. Medalogix also agreed to pay Alacare 3% of the initial value of any contract that Medalogix entered into as a result of an Alacare endorsement or referral, and 2% of the initial value (in the form of a credit on future purchases of Medalogix products) on any other contract that Medalogix secured. In turn, Alacare agreed to endorse the Bridge and Touch by reference and, upon request, agreed to host demonstrations of its use of those products for potential customers. A copy of the Addendum to the Services Agreement is attached hereto as Exhibit B Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 5 of 10 13. Since the parties entered into the Addendum to the Services Agreement, Alacare has in fact assisted in Medalogix s marketing and sales of the Bridge and Touch products by referring other home health care providers to Michalogin, by endorsing Medalogix s products to such providers, by acting as a general reference for Medalogix, by participating in press interviews and other publicity to promote Medalogix's products, and by hosting product demonstrations. It has attended tradeshows with Medalogix and participated in meetings with potential Medalogix customers. It has also continued to discuss with Medalogix potential refinements of to both products, as well as the development and design of new products, including in a two-day development session that Medalogix recently hosted in Nashville in August 2014. Alacare executives also participate in regular Executive Reviews " to provide feedback to Medalogix on the effectiveness of the Bridge and Touch products, which Alacare has deployed in all of its offices and seven of its offices, respectively. Pursuant to the Addendum to the Services Agreement, Alacare has also received commissions on Medalogix's sales of the Bridge and Touch products. 14. Medalogix's Bridge and Touch products have been well-received in the home health care industry, and Medalogix is now a fast-growing company. Not coincidentally, in late 2014, Alacare suddenly began demanding additional compensation from Medalogix for the information and services that it had provided to Medalogix during the development of the Bridge and Touch products. Alacare's demand began as a request for perpetual free use of those products. As Medalogix has continued to win new contracts and receive industry accolades, however, Alacare is now also demanding a substantial, non-dilutable equity ownership interest in the Company. 15. More recently, Alacare presented Medalogix with a so-called " Intellectual Property Utilization " document that purported to reflect the extent and substance of proprietary know how, proprietary data.. and other Intellectual Property that Medalogix obtained [from Alacare.. and to Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 6 of 10 what extent such proprietary Information and IP was incorporated or was supportive of Medalogix products. 16. When Medalogix rejected the findings in Alacare's Intellectual Property Utilization " document and Alacare's continued demands for an ownership interest in the Company and free lifetime use of the software, counsel for Alacare sent Medalogix a letter demanding that Medalogix immediately remove any and all Alacare-provided or Alacare-sourced information from the Bridge and Touch products, stop licensing those products, and cease and desist all further use of any " information provided to Medalogix by Alacare. A copy of Alacare's April 20, 201s demand letter to Medalogix (the " Demand Letter) is attached as Exhibit Chereto. 17. Medalogix disputes the allegations contained in Alacare's Demand Letter. 18. Among other reasons, the Bridge and Touch products do not utilize or contain any trade secrets or other information that is proprietary to Alacare. Alacare has no property interest, intellectual or otherwise, in the medical records of its patients. Nor does Alacare have a proprietary interest in how it determines and assesses the readiness of such patients for transfer to hospice or higher-prioritized care. Those assessments are the product of, among other things, independent medical judgment Federal and state regulatory requirements, payor policies, industry practice, patient screening, conversations with family and doctors, and a whole host of other subjective factors, as opposed to some kind of secret formula " that is owned by Alacare. Indeed, Alacare entered into the Services Agreement with Medalogix precisely because it desired an analytical tool that could help it and other home health providers streamline this difficult process. 19. Further, Medalogix has neither improperly disclosed nor improperly used any of the information that it was provided by Alacare. While Alacare contends in the Demand Letter that Medalogix could not use any of the information that Alacare provided for purposes of developing Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 7 of 10 the Bridge and Touch products, the parties' contractual agreements state otherwise. The Services Agreement t expressly provides that " information provided to Medalogix by Alacare shall be used to develop predictive algorithms to determine a patient s need for hospice or other palliative care. " Moreover, the Addendum to the Services Agreement â which was entered into after Medalogix had developed the Bridge and Touch products and after Alacare had begun using them in its business reflects Alacare's consent for Medalogix to use any information that Alacare had provided during the development process that was contained in the software. Alacare, in short, knew what was in Medalogix's software and how it was being used when it entered into the Addendum to the Services Agreement, and it agreed to allow Medalogix to market that software (and, indeed, to assist Medalogix in such marketing efforts) in exchange for a sales commission of 3%. 20. Finally, by agreeing to endorse and help sell the Software in the marketplace in exchange for a commission-and then actually doing so for over a year â Alacare has not only consented to Medalogix's use of any proprietary information that is contained in the Bridge and Touch products, but it has also waived any right to claim trade secret or other similar protections over such information. COUNT I Declaratory Judgment 21. Medalogix reasserts and incorporates by reference the above paragraphs as if set forth herein in full. 22. There is an actual case and controversy between the parties. 23. Specifically, Alacare claims in the Demand Letter that Medalogix has systematically taken P from Alacare " in connection with the development of the Bridge and Touch products, has improperly used that information to enhance and improve those products, and Case 2: 15-cv-01869-RDP Document 1 Filed 04 22/15 Page 8 of 10 is improperly licensing software containing Alacare's intellectual property without Alacare's authorization or consent. 24. Alacare has demanded that Medalogix immediately cease the sale and licensing of the Bridge and Touch products. 25. Medalogix disputes that its software products contain any intellectual property or other proprietary information of Alacare, and that it has improperly used or improperly disclosed any information that Alacare provided it in connection with the development of those products. Medalogix further asserts that Alacare consented to how its information I was being used in the Bridge and Touch products when it entered into the Addendum to the Services Agreement, in which Medalogix agreed to pay Alacare a percentage of all sales of its products. Finally, Medalogix contends that by actively endorsing and marketing the Software in the marketplace, including in trade shows and Medalogix customer meetings, Alacare has consented to and licensed, impliedly or otherwise, the use of any of its information that is contained in the Bridge and Touch products, and that it has waived and/or is estopped from asserting the claims set forth in the Demand Letter. 26. Alacare's demands have created uncertainty as to the rights of the parties, and declaratory relief is necessary and appropriate in order to determine those rights going forward and to avoid future damages and uncertainty. 27. Pursuant to 28 U. S. C. 8 2201 and Rule 57 of the Federal Rules of Civil Procedure, Medalogix therefore seeks a declaratory judgment that: The patient records, patient assessments, patient record format, hospice referral and admission procedures and other information provided by Alacare to Medalogix in connection with the development and enhancement of the Bridge Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 9 of 10 and Touch products (collectively, the Alacare Information ") do not constitute trade secrets " or information that is otherwise proprietary to Alacare; b. Medalogix did not improperly disclose, misappropriate or otherwise misuse the Alacare Information by using it to develop the predictive functionality contained in the Bridge and Touch products; c. By entering into the Addendum to the Services Agreement after the Bridge and Touch products had been developed and both parties had knowledge of their contents and functionality, Alacare consented to and/or licensed Medalogix's use of any Alacare Information contained in the Software; and d. By endorsing, marketing and selling the Bridge and Touch products in the marketplace, Alacare has consented to and/or licensed Medalogix's use of any Alacare Information contained in the Software and waived and/or is estopped from asserting any claim for misappropriation of the Alacare Information. Case 2: 15-cv-01869-RDP Document 1 Filed 04/22/15 Page 10 of 10 WHEREFORE, Medalogix respectfully requests that this Court 1) Enter judgment in Medalogix s favor and against Alacare on Medalogix s claim for declaratory judgment; 2) Award Medalogix its attorneys' fees and costs incurred in this action, and 3) Award any further relief to Medalogix the Court deems necessary and proper. Respectfully submitted,. 7 and Steven A. Riley (TN BPR No. 06258) Gregory S. Reynolds (TN BPR No. 18204) James N. Bowen (TN BPR No. 24082) Riley Warnock & Jacobson, PLC 1906 West End Avenue Nashville, TN 37203 (615) 320-3700 (Telephone) (615) 320-3737 (Fax) firstname.lastname@example.org imbowen arWiplc.com greynolds arwiplc.com ONW in Attorneys for Plaintiff 10
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