333 F. Supp. 3d 1133
D. Kan.2018Background
- Hooper Holmes (Kansas) acquired Accountable Health in May 2015; both parties were bound by an MSA (services) and an NDA (Delaware choice-of-law). Hooper Holmes continued to use Wellness for on-site biometric screenings.
- After the acquisition Hooper Holmes accumulated substantial unpaid invoices to Wellness (peaked ≈ $235k unpaid after June 2016); parties exchanged payment proposals and partial weekly payments before Hooper Holmes ceased payments on June 9, 2016.
- GAF (a major client of Hooper Holmes) had been screened by Wellness under the MSA in 2014–2015; by Feb 2016 GAF internally decided not to renew with Hooper Holmes and sought a new vendor.
- In March–May 2016 Wellness employees (including one who had direct personal contact with GAF) solicited and presented to GAF and submitted pricing/worksheets derived from screening workbooks created while performing under the MSA.
- Hooper Holmes sued claiming Wellness breached the MSA (non-compete / misuse of confidential information) and the NDA; Wellness counterclaimed for unpaid invoices + interest. Court applied Delaware law and tried breach, causation, damages, and contractual limitation issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Delaware law governs | MSA/NDA select Delaware; apply Delaware law | Same | Delaware law governs (choice-of-law clause enforced) |
| Whether Hooper Holmes's prior nonpayment discharged Wellness | Hooper Holmes argued nonpayment was not material or Wellness waived by continuing to perform | Wellness argued Hooper Holmes materially breached first, discharging Wellness | Hooper Holmes materially breached by late/nonpayment, but Wellness waived right to treat contract as terminated because it continued to accept benefits (e.g., forwarded PCP forms) |
| Whether Wellness breached the MSA by soliciting GAF and using MSA-derived information | Hooper Holmes: Wellness solicited GAF and used confidential/workbook/pricing info gained under the MSA | Wellness: Aon/GAF approached Wellness; no actionable solicitation or misuse | Wellness materially breached the MSA: direct/indirect solicitation and use of confidential information; all five §241 factors supported materiality |
| Damages for Wellness’s breach (lost profits) | Hooper Holmes: lost profits > $700k from losing GAF | Wellness: GAF had already decided to leave; lost-profits speculative; MSA bars loss-of-profits | Hooper Holmes failed to prove causation with reasonable certainty; even if proven, MSA’s liability clause barred recovery of lost profits — awarded only $1 nominal for MSA breach |
| Whether Wellness breached the NDA and caused damages | Hooper Holmes: Wellness used confidential pricing and GAF workbooks in solicitations | Wellness: no damaging use or causation | Wellness breached the NDA (used pricing/workbook info), but Hooper Holmes showed no compensable damages (GAF had decided to leave); awarded $1 nominal for NDA breach |
| Counterclaim: Can Wellness recover unpaid invoices, interest, and fees after Wellness’s June 9 breach? | Wellness: entitled to outstanding invoices + 1.5% monthly interest and attorneys’ fees under MSA | Hooper Holmes: Wellness breached first, limiting recovery; fees clause applies only to third-party indemnities | Wellness recoverable in restitution for part performance for invoices rendered before Wellness’s material breach: $235,156.58 plus prejudgment interest $111,069.52; attorneys’ fees denied (indemnity clause covers third-party claims only) |
Key Cases Cited
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (choice-of-law in diversity cases)
- VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (Del. 2003) (elements of breach of contract under Delaware law)
- BioLife Sols., Inc. v. Endocare, Inc., 838 A.2d 268 (Del. Ch. 2003) (use of Restatement §241 factors for materiality)
- SIGA Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108 (Del. 2015) (requirement to prove lost profits with reasonable certainty for expectation damages)
- Summa Corp. v. Trans World Airlines, Inc., 540 A.2d 403 (Del. 1988) (entitlement to prejudgment interest on money damages)
- Neilson Bus. Equip. Ctr., Inc. v. Italo V. Monteleone, M.D., P.A., 524 A.2d 1172 (Del. 1987) (test for predominance of goods vs. services under Delaware law)
- Hudson v. D & V Mason Contractors, Inc., 252 A.2d 166 (Del. Super. Ct. 1969) (a party who materially breaches first cannot recover for a later breach; restitution may still be available)
- USH Ventures v. Global Telesystems Grp., Inc., 796 A.2d 7 (Del. Super. Ct. 2000) (nominal damages award of $1 in breach of contract context)