Personavera, LLC v. Coll. of Healthcare Info. Mgmt. Executives, CIVIL ACTION NO. 18-633
| Decision Date | 08 April 2021 |
| Docket Number | CIVIL ACTION NO. 18-633 |
| Parties | PERSONAVERA, LLC et al. v. COLLEGE OF HEALTHCARE INFORMATION MANAGEMENT EXECUTIVES d/b/a CHIME Healthcare Innovation Trust et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Presently before the Court is Defendant College of Healthcare Information Management Executives' (d/b/a CHIME), Healthcare Innovation Trust's, Russell Branzell's, and Keith Fraidenburg's Motion to Dismiss pursuant to Rule 12(b)(6). (Mot. to Dismiss, ECF No. 7.) This action arises from Plaintiffs Personavera, LLC's and Michael Braithwaite's participation in a contest, sponsored by Defendants, offering a one-million-dollar prize. After Plaintiffs had expended significant effort and resources developing a prototype for the opportunity to win, and after Plaintiffs submitted that prototype to Defendants, Defendants cancelled the contest and refused to return Plaintiffs' prototype. Plaintiffs bring the instant action alleging breach of contract, promissory estoppel, fraud, negligent misrepresentation, conversion, and violations of the Illinois Consumer Fraud and Deceptive Practices Act, 815 Ill. Comp. Stat. 505, and Illinois Prizes and Gifts Act, 815 Ill. Comp. Stat. 525. (Compl., ECF No. 1.) For the following reasons, Defendants' Motion to Dismiss will be denied.
Defendant CHIME is an Illinois non-profit corporation that "represents chief information officers and information technology professionals involved in providing and managing information technology in healthcare settings." (Compl. ¶¶ 4, 23.) Defendant Branzell is CHIME's Chief Executive Officer and President. (Id. ¶ 8.) Defendant Fraidenburg is CHIME's Chief Operating Officer and Vice President. (Id. ¶ 10.) Part of CHIME's business is to encourage development of an electronic national patient identification ("NPI") system with which healthcare providers can quickly identify and exchange information about a patient. (Id. ¶ 26, 29.)
Branzell and Fraidenburg are, respectively, CEO and President, and COO and Vice President, of Defendant Innovation Trust, also an Illinois non-profit corporation. (Id. ¶¶ 9, 11.) CHIME created Innovation Trust as a vehicle for CHIME, Branzell, and Fraidenburg to design, promote, and run a "challenge" in which members of the public were invited to compete at multiple levels to design an accurate and useable NPI system. (Id. ¶¶ 14, 33, 36, 44.) In the first level of the Challenge, termed the "Concept Blitz Round," participants were required to submit a proposal for an NPI system. The two top-scoring proposals, based on judging criteria published in guidelines on the website, would each win $30,000. (Compl. ¶ 39.) In the second level of the Challenge, termed the "Final Innovation Round," participants were to "improve upon their designs from the Concept Blitz Round and to build prototypes that demonstrate the functionality and performance of their design concept." (Initial Guidelines 6.) The Final Innovation Round itself had two levels: the first level, in which participants were again asked to submit proposals for an NPI design, and the second level, inwhich the proposal winners would submit prototypes of their design. (Id. at 6-7.) The creator of the winning prototype would be awarded one million dollars. (Id. ¶ 40.)
Participants entered the Challenge by accepting an online agreement (the "Agreement" or "Competitor Agreement"), which stated the terms of the Challenge. (Competitor Agreement Preamble, 1, Compl., Ex. B.) Section 6 of the Agreement stated that "[t]he Agreement, together with the Challenge Guidelines, constitutes the final, complete, and exclusive statement of the agreement of the parties . . ." (Id. at § 6.) The Agreement and the Guidelines were promulgated through HeroX, a website "that is used by companies to conduct and administer contests." (Compl. § 42.) The Agreement also permitted Innovation Trust to cancel the Challenge at any time and stated that participants were responsible for any costs incurred in participating in the Challenge. (Competitor Agreement §§ 5, 6(c).) The Competitor Agreement also included an Illinois choice-of-law clause. (Id. at § 6.)
Plaintiff Michael Braithwaite is a licensed professional engineer with a history of service in the U.S. Navy. (Compl. ¶ 54.) He has worked as an engineer for more than thirty years, including for aerospace contractors and biometric developers. (Id. ¶ 57.) He also owns 93.375% of the outstanding shares of Plaintiff Personavera, LLC. (Id. ¶ 3.) Beginning in January of 2016, Braithwaite entered the Challenge and designed a "biometric system that uses the unique pattern of a person's iris and shape of their face to identify them." (Id. ¶¶ 58-61.) On June 1, 2016, he was announced as one of the top two winners of the Concept Blitz Round and was awarded $30,000. (Id. ¶¶ 65, 67.) When announcing Braithwaite as a winner, Branzell was quoted as stating that the proposals "reinforce[] CHIME's belief that we can develop a solution that's scalable across the industry." (Id. ¶ 66.)
After CHIME announced the winners of the Concept Blitz Round, it updated its Guidelines for the Final Innovation Round. The updated Guidelines included a new rubric for judging the proposal round of the Final Innovation Round and stated that the "[r]equirements for the prototype submission will be announced in October . . ." (Updated Guidelines 4.) Braithwaite, either directly or through Personavera, organized a team of more than twenty individuals and companies to help formulate a submission. (Compl. ¶¶ 82-83.) Meanwhile, Defendants extended the deadline for the proposal round two times, "encourag[ing] continued participation" and stating that they wanted to give participants "ample time" to produce their submissions. (Id. ¶¶ 87, 91.) Plaintiffs submitted their proposal by the March 1, 2017 deadline. (Id. ¶¶ 99, 101.) After Plaintiffs submitted their proposal, Defendants extended the deadline for judges to select the finalists that would submit prototypes. (Id. ¶ 102.) On May 15, 2017, an announcement on the Challenge website identified Plaintiffs' submission as one of the round's four finalists. (Id. ¶¶ 107-08.) In the same notification, Defendants stated that the finalists "exhibited an extraordinary level of innovation, adoptability and implementation in creating a viable solution to solve this critical patient safety issue" and stated that they were "continu[ing] on the path toward awarding the $1 million dollar prize." (Id. ¶¶ 111-12.) Shortly thereafter, on August 9, 2017, Fraidenburg was quoted as stating that the Challenge was so important to CHIME that CHIME itself would fund the million-dollar prize if necessary and that such funding "was guaranteed at the start." (Id. ¶ 117.) Defendants contacted Braithwaite directly to discuss his participation in the prototype round. (Id. ¶ 115.)
During this time, Defendants did not promulgate the judging criteria for the prototype round as promised. (Id. ¶¶ 116, 122.) Nevertheless, Plaintiffs submitted their prototype and, onOctober 16, 2017, were notified when the judges had completed testing of all the prototypes. (Id. ¶ 120.)
On November 15, 2017, CHIME announced on the Challenge website that it was suspending the Challenge and informed Plaintiffs that it would not be awarding the one-million-dollar prize. (Id. ¶¶ 124-25.) The website announcement stated the reasoning for this decision was Innovation Trust's "failure to 'achieve the results we sought to this complex problem' and 'industry' and 'government's' failure to have 'the same level of passion and commitment that our members show....'" (Id. ¶ 131.) In a call with Braithwaite, CHIME personnel stated that the cancellation was not related to the quality of the submissions, but rather was due to CHIME's inability to achieve unstated regulatory objectives with Congress. (Id. ¶¶ 133-34.) It was only later that CHIME representatives finally stated that the cancellation was due to the poor quality of the submissions. (Id. ¶ 135.)
After the Challenge was cancelled, Plaintiffs "repeatedly demanded return of the prototype." (Id. ¶ 199.) Defendants have refused to return the prototype. (Id. ¶ 200.)
Plaintiffs filed a Complaint alleging: breach of contract, promissory estoppel, fraud, negligent misrepresentation, conversion, and violations of the Illinois Consumer Fraud and Deceptive Practices Act, 815 Ill. Comp. Stat. 505, and the Illinois Prizes and Gifts Act, 815 Ill. Comp. Stat. 525. Defendants move to dismiss the Complaint in its entirety.
Under Federal Rule of Civil Procedure 8, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Rule 12(b)(6) provides that a complaint may be dismissed for "failure to state a claim upon which relief can be granted." "To survive a motion to dismiss, a complaint must containsufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). This "'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary elements." Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).
On a motion to dismiss for failure to state a claim, we "must 'accept as true all factual allegations in the complaint and draw all inferences from the facts alleged in the light most favorable to [the plaintiff].'" Kedra v. Schroeter,...
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