Biosignia, Inc. v. Life Line Screening of Am., Ltd.

• Decision Date: 01 July 2014
• Docket Number: 1:12CV1129
• Court: U.S. District Court — Middle District of North Carolina
• Parties: BIOSIGNIA, INC., Plaintiff, v. LIFE LINE SCREENING OF AMERICA, LTD. and INTERNATIONAL DATA MANAGEMENT, Defendants.

BIOSIGNIA, INC., Plaintiff, v. LIFE LINE SCREENING OF AMERICA, LTD.and INTERNATIONAL DATA MANAGEMENT, Defendants.

1:12CV1129

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

Dated: July 1, 2014

AMENDED MEMORANDUM OPINION AND RECOMMENDATION

OF UNITED STATES MAGISTRATE JUDGE¹

This matter is before the court on Defendant International Data Management's ("IDMI") motion to dismiss for failure to state a claim (Docket Entry 57) and Defendant Life Line Screening of America, Ltd.'s ("Life Line") motion for judgment on the pleadings. (Docket Entry 68.) Both motions have been fully briefed and the matter is ripe for disposition. For the reasons that follow, it is recommended that Defendant IDMFs motion be granted in part and denied in part, and that Defendant Life Line's motion be granted.

I. FACTUAL AND PROCEDURAL BACKGROUND

BioSignia, Inc. ("Plaintiff or "BioSignia") began this action by filing its complaint on October 22, 2012, alleging breach of contract and tort causes of action against Life Line and Health Improvement Solutions, Inc. ("HIS"). In response to the complaint, HIS filed amotion to dismiss. (Docket Entry 15.) Through this motion, BioSignia learned of IDMI's involvement, and subsequently filed a motion for leave to file an amended complaint to, inter alia, add IDMI as a defendant. (Docket Entry 24.) On June 11, 2013, Plaintiff also filed a motion for a preliminary injunction. (Docket Entry 33.) A hearing was held on July 17, 2013. At the hearing, the motion to amend was granted by oral order of the Court. (See Minute Entry 2, 07/17/2013.) On July 22, 2013, the undersigned filed a memorandum opinion and recommendation, recommending that Plaintiff's motion for a preliminary injunction be denied. (Docket Entry 46.) This recommendation was later adopted by the district court by order dated August 15, 2013. (Docket Entry 52.)

On August 7, 2013, Plaintiff filed an amended complaint against three defendants: Life Line, HIS and IDMI.² (Docket Entry 48.) In the amended complaint, Plaintiff asserts the following claims against both Life Line and IDMI: (1) breach of contract, (2) breach of duty of good faith and fair dealing, (3) unfair and deceptive trade practices, (4) tortious interference with contract, and (5) tortious interference with economic advantage. Additionally, Plaintiff, in its tenth cause of action, seeks a declaratory judgment against Life Line to establish BioSignia's rights and Life Line's responsibilities under the contract between the parties.

According to the allegations of the complaint, BioSignia is a leader in the development and creation of advanced risk assessment solutions and developed the "first multiple disease health risk assessment ("HRA") product and service." (Am. Compl. ¶¶ 11, 14.) In June 2000, BioSignia obtained two United States patents and one copyright inconnection with its health risk assessment product, "Know Your Number" ("KYN"). (Id. ¶¶ 15-16.) KYN provides information on an individual's health risk factors and focuses attention to those risks that can be improved. (Id. ¶ 17.)

Life Line, a Florida company, began offering basic health screening services in 1993, including vascular ultrasound screening and biometric testing for cholesterol and glucose. In 2008, Life Line approached BioSignia regarding a potential distribution relationship between the parties. (Id. ¶ 31.) The parties entered into an initial Mutual Non-Disclosure Agreement ("NDA") in June 2008. (Id. ¶ 34.) In November 2009, Life Line and BioSignia entered into a new Mutual Confidential and Non-Disclosure Agreement ("Agreement"). (Id. ¶ 67.) It is this contract which Plaintiff alleges is at issue in this case. (Id. ¶ 7.)

Under the Agreement, Plaintiff maintained ownership of its intellectual property, Life Line was required to maintain the confidentiality of Plaintiff's information, Life Line was prohibited from reverse engineering Plaintiff's technology to develop competitive technology, and Life Line agreed that any products created by Life Line which were derivative of BioSignia intellectual property would become the property of BioSignia. (Id. ¶¶ 70-76.)

Life Line's distribution of BioSignia's KYN product was very successful, as the product "provide[d] a health risk assessment on multiple diseases and chronic illness at one time with an output report specifically designed to motivate lifestyle changes." (Id. ¶ 78.) Accordingly, as alleged in the complaint, Life Line "embarked on a plan to use the information it had already acquired from BioSignia, and acquire additional information fromBioSignia, to reverse engineer, copy and otherwise develop a derivative work of BioSignia's KYN in order to wrongfully compete with BioSignia." (Id. ¶ 86.)

Also, in 2010 BioSignia partnered with the television show "The Biggest Loser" to provide the KYN health assessment to contestants and viewers of the show. (Id. ¶ 58.) On December 16, 2009, in order to serve the patients from the show, BioSignia entered into a Services Agreement ("IDMI Services Agreement") with IDMI under which IDMI would receive and process patient data and ultimately build a marketing data warehouse for BioSignia at IDMI. (Id.¶ 60.) This agreement contained a confidentiality provision by which both parties agreed that "all matters between the parties, including pricing and other proprietary information of IDMI" shall be confidential and not disseminated to any third parties. (Id. ¶ 61.) The IDMI Services Agreement remains in effect. (Id.)

BioSignia alleges that Life Line hired Health Improvement Services, Inc. ("HIS") to develop an HRA specifically for Life Line. The HRA developed by HIS and used by Life Line is called "6 For Life." (Id. ¶ 113.) Plaintiff also alleges that Life Line used information that it and IDMI had wrongfully obtained from BioSignia in developing the "reverse engineered derivative of BioSignia's KYN." (Id. ¶ 119.) According to Plaintiff, this use and sharing of BioSignia's information constitutes a material breach of the agreements between BioSignia and Life Line and IDMI. (Id. ¶ 121.) Further, BioSignia alleges that because 6 For Life is a derivative product of KYN, under the Agreement, BioSignia is entitled to ownership of 6 For Life. (Id. ¶ 165.) Additionally, BioSignia alleges that the conduct of Life Line and IDMI in obtaining BioSignia's trade secrets and intellectual property under false pretenses so as to reverse engineer a competitive product amounted to unfair and deceptivetrade practices in violation of the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1(a). (Id. ¶¶ 103-112, 240-48.)

II. STANDARD OF REVIEW

A. Motion for Judgment on the Pleadings (Rule 12(c))

Federal Rule of Civil Procedure 12(c) provides that "[a]fter the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." Fed.R.Civ.P. 12(c). In resolving a motion for judgment on the pleadings, the court must accept all of the non-movant's factual allegations as true and draw all reasonable inferences in its favor. Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002). Judgment on the pleadings is warranted where the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Id. The court may consider the complaint, answer, and any materials attached to those pleadings or motions for judgment on the pleadings "so long as they are integral to the complaint and authentic." Philips v. Pitt Cnty Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009). Unlike a Rule 12(b)(6) motion, the court may consider the answer as well in deciding a Rule 12(c) motion. Alexander v. City of Greensboro, 801 F. Supp. 2d 429, 433 (M.D.N.C. 2011).

Although a motion for judgment on the pleadings pursuant to Rule 12(c) is separate and distinct from a Rule 12(b)(6) motion to dismiss, federal courts apply the same standard in considering both motions. Independence News, Inc. v. City of Charlotte, 568 F.3d 148, 154 (4th Cir. 2009); Burbach, 278 F.3d at 405-06; Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999).

B. Failure to State a Claim (Rule 12(b)(6))

A motion to dismiss pursuant to Rule 12(b)(6) tests the sufficiency of the complaint. Edwards, 178 F.3d at 243. A complaint that does not "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face'" must be dismissed. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct." Id.; see also Simmons & United Mortg. & Loan Invest., 634 F.3d 754, 768 (4th Cir. 2011) ("On a Rule 12(b)(6) motion, a complaint must be dismissed if it does not allege enough facts to state a claim to relief that is plausible on its face.") (emphasis in original) (internal citation and quotation marks omitted). The "court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff in weighing the legal sufficiency of the complaint," but does not consider "legal conclusions, elements of a cause of action, . . . bare assertions devoid of factual enhancement[,] . . . unwarranted inferences, unreasonable conclusions, or arguments." Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations omitted). In other words, the standard requires a plaintiff to articulate facts, that, when accepted as true, demonstrate the plaintiff has stated a claim that makes it plausible he is entitled to relief. Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 678, and Twombly, 550 U.S. at 557).

III. DISCUSSION

A. IDMI Motion to Dismiss

1. Breach of Contract (Third Cause of Action)

IDMI argues that Plaintiff has...