Aym Technologies, LLC v. Rodgers

Citation2019 NCBC 63
Decision Date16 October 2019
Docket Number16-CVS-21788
PartiesAYM TECHNOLOGIES, LLC, Plaintiff, v. GENE RODGERS, SCOPIA CAPITAL MANAGEMENT LP, and COMMUNITY BASED CARE, LLC, Defendants.
CourtSuperior Courts of Law and Equity of North Carolina

Wilder Pantazis Law Group, by Raboteau T. Wilder, Jr., Jefferson Moors PLLC, by Jefferson A. Moors, and Rayburn Cooper &amp Durham, PA, by G. Kirkland Hardymon and Benjamin E. Shook for Plaintiff Aym Technologies, LLC.

Bell Davis & Pitt, PA, by Joshua B. Durham, Edward B. Davis and Jason B. James, for Defendant Gene Rodgers.

Pollack Soloman Duffy, LLP, by Barry S. Pollack, and Ogletree, Deakins, Nash, Smoak & Stewart, PC, by Benjamin R. Holland and Lia A. Lesner, for Defendants Scopia Capital Management LP and Community Based Care, LLC.

ORDER AND OPINION ON PLAINTIFF'S MOTION TO SUPPLEMENT THE SUMMARY JUDGMENT RECORD, DEFENDANTS SCOPIA CAPITAL MANAGEMENT LP AND COMMUNITY BASED CARE, LLC'S MOTION FOR SUMMARY JUDGMENT, AND DEFENDANT GENE RODGERS'S MOTION FOR SUMMARY JUDGMENT

LOUIS A. BLEDSOE, III CHIEF BUSINESS COURT JUDGE.

I. FACTUAL BACKGROUND

1. THIS MATTER is before the Court on the following motions in the above-captioned case: (i) Plaintiff Aym Technologies, LLC's Motion for Leave of Court to Supplement the Summary Judgment Record ("Motion to Supplement the Record"); (ii) Defendants Scopia Capital Management LP and Community Based Care, LLC's Motion for Summary Judgment; and (iii) Defendant Gene Rodgers's Motion for Summary Judgment (collectively, the "Motions").

2. The Court, having considered the Motions, the briefs in support of and in opposition to the Motions, and the arguments of counsel at the hearing on the Motions, hereby GRANTS the Motions and dismisses Plaintiff's claims with prejudice.

3. The Court does not make findings of fact on motions for summary judgment. See Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 26 N.C.App. 138, 142, 215 S.E.2d 162, 164-65 (1975). Rather, the Court summarizes the relevant evidence of record, noting both the facts that are disputed and those that are uncontested, to provide context for the claims and the Motions. Id.

4. This action arises out of Plaintiff Aym Technologies, LLC's ("Aym" or "Plaintiff") contention that Defendant Gene Rodgers ("Rodgers"), while an independent contractor of Aym, acted duplicitously and in derogation of his contractual duties to Aym by helping Defendants Scopia Capital Management LP ("Scopia") and Community Based Care, LLC ("CBC") acquire North Carolina healthcare providers that Rodgers knew Aym was interested in acquiring under its confidential acquisition plan-a plan Aym claims it shared with Rodgers under a nondisclosure agreement and which Aym contends Rodgers subsequently shared with Scopia and CBC without Aym's consent.

5. Aym is engaged in the business of providing its comprehensive management software―"OnTarget"―primarily to the North Carolina Medicaid intellectual and developmental disability ("IDD") industry. (Am. Aff. Lewis Quinn ¶ 6 [hereinafter "Quinn Aff."], ECF No. 152.) According to Aym, OnTarget is "a suite of programs which enable[s] providers to do everything that [i]s necessary to operate in the Medicaid environment[, ]" (Quinn Aff. ¶ 6), and includes functions for "payroll, time keeping, medical record storage, generat[ing] reports which could be used to prepare . . . tax returns, maintain[ing] the required clinical documentation, and submit[ting] electronic billing which complie[s] with Medicaid regulations[, ]" (Quinn Aff. ¶ 7).

6. Rodgers is a North Carolina resident working in the IDD industry. Aym entered an Independent Contractor Agreement ("ICA") with Rodgers dated April 1, 2009. (Ex. D Rodgers Aff. [hereinafter "ICA"], ECF No. 113.) Under the ICA, Rodgers agreed, on a nonexclusive basis, to "market/sell products produced by" Aym and consult with Aym "on various matters including but not limited to, the development of marketing plans and information, setup and creation of a national sales force, and other sales related activities." (ICA 2-3.) At the same time Rodgers was working for Aym as an independent contractor, he worked full time, first at Universal Mental Health Services, Inc., where his responsibilities included "roll[ing] up small agencies into Universal[, ]" (Aff. Gene Rodgers ¶ 4 [hereinafter "Rodgers Aff."], ECF No. 109), and later, beginning in 2011, as the Mergers and Acquisitions Director for Providence Services Corp., (Rodgers Aff. ¶ 5).

7. Aym asserts that beginning in 2013, Aym's goal was to take advantage of a perceived market opportunity to purchase and vertically integrate certain customer IDD providers in North Carolina and implement its OnTarget software among the purchased entities to create one large dominant provider in the North Carolina IDD industry. (Quinn Aff. ¶ 22.) Aym claims that it was in a unique position to identify and respond to changes then occurring in North Carolina's IDD industry, (Quinn Aff. ¶ 10), because Aym determined, based on customer information it accessed through its OnTarget software, that providers were struggling under increasing regulatory pressures, provider-owners were increasingly eager to sell their companies as they reached retirement age, and Aym's customers' businesses were financially volatile, (Quinn Aff. ¶¶ 12-18). What Aym claims it had and its competitors did not was "clarity regarding the difficulties providers were experiencing," and "knowledge of what the OnTarget software could bring to bear to correct these problems[.]" (Quinn Aff. ¶ 19.)

8. Aym contends that to capitalize on this perceived market opportunity, it developed a written "Vertical Integration Strategy Plan" (the "Plan"). (See Quinn Aff. ¶ 25; see also MSJ-8 Dep. Ex. 66 [hereinafter "Plan"], ECF No. 106.) According to Aym's CEO, Lewis Quinn ("Quinn"), the Plan describes "how to identify targets for acquisition," the "idea to start with a foundation company and thereafter acquire smaller targets," and how "to finance the acquisitions." (Quinn Aff. ¶ 25.)

9. In early August 2013, Quinn persuaded Rodgers to assist in the acquisition of IDD providers in North Carolina. (Quinn Aff. ¶¶ 36-38.) Quinn avers that he disclosed the Plan to Rodgers at that time, (Quinn Aff. ¶¶ 36-38), allegedly relying on the confidentiality provision in the ICA, which provided that Rodgers must not disclose "any information not generally known to the public about [Aym], and [Aym's] Customers and Vendors," (ICA § 1.01).[1]

10. Scopia provides investment management services to Scopia HCM Partners, LLC ("Scopia HCM"), which in turn owns CBC, a holding company formed in 2015 to provide services to the North Carolina IDD market through wholly owned subsidiaries. (See Ex. 1 Decl. Lia Lesner ¶¶ 2-3, ECF No. 52.3.) The Court previously dismissed all claims against Scopia HCM. See Aym Techs., LLC. v. Rodgers, 2018 NCBC LEXIS 14, at *53-54 (N.C. Super. Ct. Feb. 9, 2018).

11. While the parties contest whether he was permitted to do so, it is undisputed that Rodgers assisted Eddie Hughes, the owner of North Carolina IDD provider Hughes Behavioral Services ("Hughes"), and Rankin Whittington ("Whittington"), the owner of North Carolina IDD provider Home Care Management ("HCM"), in the sale of their businesses by introducing them to prospective buyers, including Defendant Scopia and its affiliates. (Rodgers Aff. ¶¶ 7, 19.) It is also undisputed that at the time Rodgers made these introductions, he had known both Eddie Hughes and Whittington for many years through interactions unrelated to Aym. (Rodgers Aff. ¶¶ 7, 19.)

12. Aym claims that the Plan identified HCM for Aym's potential acquisition, (Quinn Dep. Vol. II 119:7-23), and that Rodgers was aware that Aym was interested in purchasing Hughes, (MSJ-3 Dep. Conf. Lewis Quinn 151:16-17 [hereinafter "Quinn Dep. Vol. I"], ECF No. 101), and Lindley Habilitation Services, Inc. ("Lindley"), (MSJ-1 Dep. Douglas Finley 32:17-33:10 [hereinafter "Finley Dep."], ECF No. 99).[2] It is undisputed that Aym attempted to purchase HCM on two occasions, first in 2013 and again in 2014-15, but was unsuccessful. (See Quinn Aff. ¶¶ 40, 42- 44). It is also undisputed that Aym tried but failed to acquire Lindley in 2015. (MSJ-5 David Swintosky Dep. 133:20-135:13 [hereinafter "Swintosky Dep. Vol. I"], ECF No. 103.) Similarly, the undisputed record shows that, although Aym was in negotiations to purchase Hughes in this same timeframe, Aym and Hughes were never able to reach a final agreement. (Finley Dep. 76:19-77:19, 94:25-95:10.)

13. Separately from Aym and its acquisition efforts, Scopia and CBC began exploring potential acquisition opportunities in the North Carolina IDD market at the beginning of 2015. (Ex. 15 Aff. Raboteau T. Wilder, Jr. 7:16-9:18 [hereinafter "Wittels Dep."], ECF No. 153.1.) Thereafter, Scopia successfully purchased HCM on July 17, 2015, (see Ex. 10 Decl. Barry Pollack, ECF No. 119.1), Hughes in September 2015, and Lindley in 2016, (Rodgers Aff. ¶¶ 19, 21). Aym contends that Scopia and CBC were only able to succeed in acquiring HCM, Hughes, and Lindley because Rodgers disclosed the Plan to Scopia in violation of the ICA's terms and the North Carolina Trade Secret Protection Act.

14. In July 2015, after Scopia acquired HCM and CBC was formed Quinn sought to sell Aym to Scopia, advocating for the roll up and vertical integration of Aym with HCM and other IDD providers that Scopia or CBC intended to identify and acquire in the future. (Quinn Aff. ¶ 58.) Quinn envisioned himself as the CEO of this new entity and engaged in negotiations with Scopia on that basis. (Ex. 13 Decl. Barry Pollack, ECF No. 119.1.) During these negotiations, Quinn e-mailed the Plan to David Wittels ("Wittels"), (Ex. D Aff. David Wittels [hereinafter "Ex. D Wittels Aff."]...

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