2:16-cv-00018
W.D. Va.Nov 21, 2016Background
- Cornerstone Therapy Services (TN corp., operating in VA) negotiated with Reliant for a potential acquisition and executed an NDA permitting use of disclosed information only for evaluating the deal and containing a two-year nonsolicitation clause for managerial employees.
- Cornerstone disclosed client lists, pricing, profit/loss, patient mix, and contract details relating to services at two CCR-owned skilled nursing facilities (Abingdon Health & Rehab and Lee Health & Rehab).
- Reliant later contracted with CCR to provide therapy services at those facilities; CCR served 90-day nonrenewal notices to Cornerstone and Reliant hired Cornerstone’s managerial staff working at the facilities.
- Cornerstone sued for breach of contract (NDA), tortious interference with business expectancy, violation of the Virginia Uniform Trade Secrets Act (VUTSA), and violations of federal healthcare law (Anti-Kickback Statute/FCA and Medicare regulation).
- Defendants moved to dismiss under Rule 12(b)(6). The court denied dismissal as to breach of the NDA’s nonsolicitation provision but dismissed all other claims for failure to plead plausible facts (speculation insufficient; heightened particularity required for FCA/qui tam theories).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach — misuse of confidential information disclosed under NDA | Reliant used Cornerstone’s client lists, pricing, and financials to win CCR contracts | No factual allegations show Reliant used the information beyond evaluating acquisition; inference is speculative | Dismissed — allegations of misuse are speculative and insufficiently pleaded |
| Breach — nonsolicitation clause of NDA | Reliant solicited and hired Cornerstone’s managerial employees in violation of NDA | Nonsolicitation clause unenforceability not argued; defendants assert hires lawful/general solicitation | Not dismissed — allegations that Reliant held meetings to solicit and hired managerial employees plausibly state breach |
| Tortious interference with business expectancy | Reliant intentionally interfered with Cornerstone’s contracts with CCR by false statements and misuse of confidential info | No factual allegations showing who made statements, when, or that misuse caused CCR’s terminations; conduct speculative | Dismissed — plaintiff failed to plead improper methods or causal facts beyond speculation |
| VUTSA (trade secrets) | Profit/loss statements, rate formulas, patient-mix data and pricing are trade secrets and were misappropriated | Pricing lacks independent economic value and was known to contracting parties; no facts show misuse | Dismissed — even assuming secrecy, plaintiff failed to plead factual misappropriation |
| Federal law (Anti‑Kickback / FCA and Medicare regulation) | Reliant exchanged software/management for referrals (kickbacks); alleged violation of 42 C.F.R. §482.13 patient-choice rules | Anti‑Kickback is criminal and not a private cause of action; FCA/qui tam requires strict procedural and Rule 9(b) particularity; regulation creates no private right | Dismissed — qui tam/FCA theory not pleaded with required particularity; Medicare regulation provides no private right of action |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions are not entitled to the presumption of truth at pleading stage)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (complaint must plead facts sufficient to state a plausible claim)
- Navar, Inc. v. Fed. Bus. Council, 784 S.E.2d 296 (Va. 2016) (elements of breach of contract and requirement of causal connection for damages)
- Dunlap v. Cottman Transmission Sys., LLC, 754 S.E.2d 313 (Va. 2014) (elements of tortious interference with business expectancy)
- Dunn, McCormack & MacPherson v. Connolly, 708 S.E.2d 867 (Va. 2011) (examples of "improper methods" in interference claims)
- Smith v. Clark/Smoot/Russell, 796 F.3d 424 (4th Cir. 2015) (FCA claims must satisfy Rule 9(b) particularity)
- United States ex rel. Owens v. First Kuwaiti Gen. Trading & Contracting Co., 612 F.3d 724 (4th Cir. 2010) (qui tam complaints must give government adequate information to investigate)