Coastal Labs., Inc. v. Jolly
| Decision Date | 23 November 2020 |
| Docket Number | Civil Action No. RDB-20-2227 |
| Parties | COASTAL LABORATORIES, INC., et al., Plaintiffs, v. Tarun JOLLY, M.D., et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
Andrew C. White, William Nelson Sinclair, Steven Neal Leitess, Silverman Thompson Slutkin and White LLC, Baltimore, MD, for Plaintiffs.
Phillip Chalker, the Law Office of Phillip E. Chalker, Baltimore, MD, Tarak Anada, Pro Hac Vice, Taylor Wimberly, Pro Hac Vice, Jones Walker LLP, New Orleans, LA, for Defendants.
Plaintiffs Coastal Laboratories, Inc. and AMSOnSite, Inc. (collectively, "Plaintiffs") bring this tort action against individual Defendants Tarun Jolly, M.D., James F. Silliman, M.D., James Bauder "Bo" Silliman, David J. Vigerust, M.S., Ph.D., and Benjamin Williamson, and corporate Defendants Cormeum Lab Services, LLC, Sensiva Health, LLC, Z DiagnostiX, LLC, and Vita Health Systems, LLC (collectively, "Defendants") with respect to Plaintiffs’ efforts to acquire medical testing laboratories to assist their infection control management program designed specifically for nursing homes. Plaintiffs allege tortious interference with prospective business relations (Count I), tortious interference with economic relations (Count II), civil conspiracy (Count III), unfair competition (Count V), and fraud (Count VI) against all Defendants. (Am. Compl., ECF No. 13.) In addition, Plaintiffs allege a conversion claim against Defendant Cormeum (Count IV). (Id. ) Presently pending is Defendants’ Motion to Dismiss Plaintiffs’ Amended Complaint Pursuant to Rules 12(b)(3), 12(b)(2), 12(b)(6), and the "First-Filed" Rule. (ECF No. 14.) On November 18, 2020, this Court conducted a motions hearing and heard argument on the pending Motion. See Local Rule 105.6 (D. Md. 2018). For the reasons stated on the record at the motions hearing, and for the reasons that follow, Defendants’ Motion to Dismiss Plaintiffs’ Amended Complaint Pursuant to Rules 12(b)(3), 12(b)(2), 12(b)(6), and the "First-Filed" Rule (ECF No. 14) shall be DENIED.
In ruling on a motion to dismiss, this Court "accept[s] as true all well-pleaded facts in a complaint and construe[s] them in the light most favorable to the plaintiff." Wikimedia Found. v. Nat'l Sec. Agency , 857 F.3d 193, 208 (4th Cir. 2017) (citing SD3, LLC v. Black & Decker (U.S.) Inc. , 801 F.3d 412, 422 (4th Cir. 2015) ). The Court may consider only such sources outside the complaint that are, in effect, deemed to be part of the complaint, for example, documents incorporated into the complaint by reference and matters of which a court may take judicial notice. Sec'y of State for Defence v. Trimble Navigation Ltd. , 484 F.3d 700, 705 (4th Cir. 2007).
Plaintiffs Coastal Laboratories, Inc. ("Coastal Labs") and AMSOnsite, Inc. ("AMS") are Delaware corporations with their principal places of business in Annapolis, Maryland. (Am. Compl ¶¶ 7-8, ECF No. 13.) Coastal Labs uses a proprietary molecular technology platform that allows it to generate timely and accurate analyses of dozens of respiratory pathogens, including COVID-19. (Id. ¶ 7.) AMS provides clinical environmental infection prevention and control services to residential nursing and rehabilitation facilities in several states, including Maryland. (Id. ¶ 8.)
Defendant Cormeum Lab Services, LLC ("Cormeum") is a Louisiana LLC formed on June 14, 2019 with its place of business in Louisiana. (Id. ¶ 14.) Cormeum is a medical laboratory affiliated with co-Defendant Sensiva Health, LLC, ("Sensiva") and provides lab testing services similar to Coastal Labs. (Id. ) Defendant Sensiva is a Louisiana LLC formed on March 23, 2020 with its place of business in Louisiana. (Id. ¶ 15.) Sensiva is a provider of COVID-19 virus and anti-body testing and consulting services, and claims rapid, accurate results that set it apart from competitors. Sensiva uses Cormeum Labs to provide lab services for its testing needs. (Id. ) Defendant Z DiagnostiX, LLC ("ZDX") is a Delaware LLC formed on November 5, 2019 with its place of business in South Carolina. (Id. ¶ 16.) ZDX holds itself out as a management company that assists diagnostic labs with their management and marketing efforts. (Id. ) Defendant Vita Health Systems, LLC ("Vita") is a Louisiana LLC formed on July 2, 2019 with its place of business in Louisiana. (Id. ¶ 17.) Vita is a healthcare technology provider of practice management applications that are used by diagnostic labs to process and report test results, and to upload billing information to billing entities to invoice for testing services rendered. (Id. )
Plaintiffs allege that the corporate Defendants Cormeum, Sensiva, ZDX, and Vita are affiliated and share common ownership and/or management with the individual Defendants Tarun Jolly, James Silliman, Bo Silliman, David Vigerust, and Benjamin Williamson. (Id. ¶ 18.) Defendant Tarun Jolly, M.D. ("Dr. Jolly") is a resident of New Orleans, Louisiana, and is a principal of Defendant Cormeum. (Id. ¶ 9.) Defendant James Silliman, M.D. ("James Silliman") is a resident of South Carolina and is a principal of Defendants Sensiva and ZDX. (Id. ¶ 10.) Defendant James Bauder Silliman ("Bo Silliman") is a resident of South Carolina and is Dr. Silliman's son. (Id. ¶ 11.) Bo Silliman holds himself out as an officer of Defendant ZDX. (Id. ) Defendant David Vigerust ("Vigerust") is a resident of Tennessee and is Chief Scientific and Compliance Officer for Defendant Sensiva. (Id. ¶ 12.) Vigerust also holds himself out as an officer for Defendant ZDX. (Id. ) Defendant Benjamin Williamson is a resident of Florida and is the co-founder and principal of Defendants Sensiva and Vita. (Id. ¶ 13.)
In 2017, Plaintiff AMS sought to partner with a lab to test and analyze samples AMS collected through its infection control management program designed for nursing homes known as "Sterisis." (Id. ¶¶ 19-20.) After negotiations to partner with a potential lab in Tennessee fell through, AMS was still looking to partner with a testing lab in December of 2019. (Id. ¶¶ 21-22.) On or about December 19 and 20, 2019, the president of AMS, Patrick Britton-Harr, received a text message and email from Defendant James Silliman who said he knew of labs that AMS may be interested in acquiring. (Id. ¶ 22.) Britton-Harr was interested, and James Silliman arranged an introduction with Dr. Jolly, the owner of Cormeum Labs. (Id. ) However, it is alleged that, in October of 2019, the U.S. Department of Justice announced, and the media reported, that Dr. Jolly and two of his partners agreed to pay a $1 million fine to the DOJ in connection with a qui tam settlement regarding a Medicare kickback scheme. (Id. ¶ 23.)
Britton-Harr and Jolly spoke over the phone several times in February of 2020. (Id. ) Jolly told Britton-Harr that he had two labs for sale in Arizona, one in Scottsdale owned by Provista Health, LLC and one in Phoenix owned by Integra Molecular, LLC. (Id. ¶ 24.) Dr. Jolly was the sole member and 100% owner of both Provista and Integra ("the Arizona labs"). (Id. ) The Provista lab was previously owned by a company named Volente, whose CEO was Defendant James Silliman. (Id. ¶ 25.) Britton-Harr decided to purchase the Arizona labs to provide lab services in support of AMS’ Sterisis infection control and prevention program. (Id. ¶ 26.) Britton-Harr formed Coastal Labs to do so. (Id. )
While Britton-Harr and Jolly were negotiating the purchase and sale of the Arizona labs, the COVID-19 Pandemic broke out and created the immediate need for labs to test individuals for infection by the virus. (Id. ¶¶ 27-29.) Nursing homes were among the most in need of immediate COVID-19 testing, prompting Coastal and AMS to expand services to meet anticipated nationwide need to control the spread of the virus. (Id. ¶ 30.) AMS had a substantial number of then-existing contractual relationships with nursing homes for which it provided infection control and prevention services. (Id. ¶ 28.)
During negotiations, Britton-Harr allegedly repeatedly informed Dr. Jolly and co-Defendants James Silliman, Vigerust, and Williamson that Coastal Labs expected a surge in testing volume and needed to equip the Arizona labs to meet the volume expected and obtain the required regulatory authorization to permit COVID-19 testing. (Id. ¶ 31.) The COVID-19 compliance procedures required any lab that wanted to perform COVID-19 testing to obtain an "Emergency Use Authorization" ("EUA") prior to testing and as a prerequisite to billing for lab services. (Id. ¶ 34.) Dr. Jolly, James Silliman, Vigerust, and Williamson repeatedly assured Coastal that the Arizona labs were properly equipped to handle current non-COVID-19 testing volume, but advised Coastal on steps that it needed to take to be able to perform the larger COVID-19 testing volume, including adding lab equipment, gaining regulatory approval, and improving practice management, reporting, billing systems, and software. (Id. ¶ 32.)
On or about March 6, 2020, Coastal principals Britton-Harr and G. Ellsworth Harris had an in-person meeting in Charleston, South Carolina with Defendants James Silliman, Bo Silliman, and David Zigerust, who represented Defendant ZDX. (Id. ¶ 33.) At the meeting, Britton-Harr and Harris reiterated to ZDX that a material incentive for Coastal to acquire the Arizona labs and to engage ZDX thereby was for ZDX to assist Coastal in completing the regulatory compliance procedures so the labs could perform COVID-19 testing. (Id. ) The ZDX representatives assured Coastal that ZDX could and would meet Coastal's needs and timeline. (Id. ) ZDX repeatedly reassured Coastal that it could obtain the EUA consistent with Coastal's detailed timeline. (Id. ¶¶ 35-36.)
On March 15, 2020, Coastal Labs and ZDX entered into a "Management Services Agreement," by which ZDX agreed to provide lab...
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