Phreesia, Inc. v. Certify Glob.
| Decision Date | 29 November 2022 |
| Docket Number | Civ. DLB-21-678 |
| Parties | PHREESIA, INC., Plaintiff, v. CERTIFY GLOBAL, INC., et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
Plaintiff Phreesia, Inc. (“Phreesia”) filed suit against defendants Certify Global, Inc. d/b/a Certify (“Certify”), Certify Health, Rolling Rock Software Pvt Ltd., and Timothy Goodwin, Certify's Vice President, alleging a conspiracy to misappropriate Phreesia's trade secrets, copy its software design, and interfere with its customer relationships. ECF 1 & 27. This Court granted in part the defendants' motion to dismiss, ECF 28, and dismissed Phreesia's tortious interference claim. ECF 36. The defendants filed an answer and Certify asserted two counterclaims against Phreesia. ECF 37. Certify claims tortious interference with a business relationship (Count I) and unfair competition (Count II) based on alleged false and disparaging statements made by Phreesia to a prospective Certify business associate. Id. Phreesia moves to dismiss the counterclaims on the grounds that Certify has not adequately alleged misconduct or any redressable harm. ECF 47. The motion is fully briefed. ECF 50 & 55. No hearing is necessary. See Loc. R. 105.6. For the following reasons, the motion to dismiss is denied.
Certify and Phreesia are competitors that offer patient intake software for use by healthcare providers. ECF 37, ¶¶ 6-7. Certify is the smaller of the two companies and has less market share. Id. ¶ 15. In the spring of 2020, global healthcare provider Providence St. Joseph Health a/k/a Providence Health & Services (“Providence”) contacted Certify about engaging its services. Id. ¶ 8. Following meetings over the summer, Providence issued in October 2020 a Request for Proposal (“RFP”) to Certify, Phreesia, and non-party Epic Systems Corporation requesting proposals and bids regarding patient intake software. Id. ¶¶ 9-10. As part of the RFP process, Providence met with Certify and contacted various references provided by Certify, including a large U.S. health system that is a significant client of Certify (the “Certify Client”). Id. ¶ 11. In early January 2021, a senior executive with Providence informed Certify that it had outperformed the other candidates because of the breadth of services it offered and would be selected as the winner. Id. ¶ 13. Certify expected the Providence account to generate approximately $60 million in revenues over three years. Id. ¶ 14.
Certify believes that Phreesia learned of Providence's anticipated selection and “undertook an unlawful plan to interfere with” the business relationship. Id. ¶ 15. On January 22, 2021, a senior executive with Providence called Certify's founder and managing director, Marc Potash, and advised that there was a rumor circulating that the Certify Client planned to replace Certify with Phreesia at all its locations. Id. ¶¶ 8, 16. The rumor was false, and the Certify Client remains a customer of Certify. Id. ¶ 17. Potash contacted the Certify Client that afternoon, and an executive with the Certify Client responded over email that there were no discussions about replacing Certify, that it would be helpful to know who was allegedly making the false claims, and that the company was too busy “to be distracted with rumors.” Id. ¶ 18. Certify believes Phreesia spread the false rumor to wrongfully interfere with the impending Providence contract and Certify's relationship with the Certify Client. Id.
Over the next few weeks, Providence began conducting initial conferences with Certify to discuss implementing Certify's patient intake platform. Id. ¶ 19. Certify believes that around this time, Phreesia informed Providence that Certify had engaged in the conduct Phreesia alleges in its complaint in this lawsuit-that Certify had unlawfully accessed Phreesia's system in 2018 and copied its patient intake platform and code. Id.; see ECF 27. Phreesia sued Certify shortly after contacting Providence.[1] ECF 37, ¶ 19. Certify maintains that Phreesia's allegations (and, thus, its alleged statements to Providence) are false. Id. Certify accessed the Phreesia platform lawfully and at the direction of one of Phreesia's clients in order to collect the client's patient data from the system, and it “never employed a patient intake platform that copied Phreesia's inferior system.” Id. ¶ 22. Certify also views the timing of Phreesia's allegations as suspicious; Phreesia records access to its system, so it knew about Certify's access when it occurred in 2018 but only contacted Providence and filed suit after it “thought it lost the Providence RFP to Certify[.]” Id. ¶ 20.
Providence never executed a contract with Certify, and the business relationship ended. Id. ¶ 23. Certify blames Phreesia's false statements and rumormongering, and it claims tortious interference with its business relationship and unfair competition. Id. ¶¶ 24-34. After reviewing the defendants' answer and Certify's counterclaims, Phreesia filed a letter expressing its intent to file a motion to dismiss the counterclaims and previewing its arguments. ECF 43. The Court inquired whether Certify wanted to amend its counterclaims in response, ECF 44, and Certify elected to stand by its pleading, ECF 46. Phreesia then moved to dismiss both counterclaims with prejudice on the grounds it previously had identified. ECF 47.
Under Rule 12(b)(6), a party may seek dismissal for failure “to state a claim upon which relief can be granted.” Robertson v. Anderson Mill Elementary Sch., 989 F.3d 282, 290 (4th Cir. 2021) (quoting Fed.R.Civ.P. 12(b)(6)). To survive the challenge, the opposing party must have pleaded facts demonstrating it has a plausible right to relief from the Court. Lokhova v. Halper, 995 F.3d 134, 141 (4th Cir. 2021) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A plausible claim is more than merely conceivable or speculative. See Holloway v. Maryland, 32 F.4th 293, 299 (4th Cir. 2022). The allegations must show there is “more than a sheer possibility that the defendant has acted unlawfully.” Int'l Refugee Assistance Project v. Trump, 961 F.3d 635, 648 (4th Cir. 2020) (quoting Iqbal, 556 U.S. at 678)). But the claim does not need to be probable, and the pleader need not show “that alternative explanations are less likely” than their theory. Jesus Christ is the Answer Ministries, Inc. v. Baltimore Cnty., 915 F.3d 256, 263 (4th Cir. 2019) (quoting Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473, 484 (4th Cir. 2015)).
When ruling on a Rule 12(b)(6) motion, the Court must accept the pleaded allegations as true and draw all reasonable inferences in favor of the pleader. Williams v. Kincaid, 45 F.4th 759, 765 (4th Cir. 2022). But the Court does not accept “legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments.” United States ex rel. Taylor v. Boyko, 39 F.4th 177, 189 (4th Cir. 2022) (quoting United States ex rel. Nathan v. Takeda Pharms. N. Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013)). Merely reciting a claim's elements “and supporting them by conclusory statements does not meet the required standard.” Sheppard v. Visitors of Va. State Univ., 993 F.3d 230, 234 (4th Cir. 2021) (quoting ACA Fin. Guar. Corp. v. City of Buena Vista, 917 F.3d 206, 212 (4th Cir. 2019)). The Court does not “does not resolve contests surrounding facts, the merits of a claim, or the applicability of defenses.” Ray v. Roane, 948 F.3d 222, 226 (4th Cir. 2020) (quoting Tobey v. Jones, 706 F.3d 379, 387 (4th Cir. 2013)).
Phreesia argues that Certify's counterclaims are not supported by specific factual allegations as required by Rules 8 and 9(b) of the Federal Rules of Civil Procedure. It contends that Certify alleges no specific conduct by Phreesia and no basis for the assertion that Phreesia caused it harm. It also asserts the litigation privilege to the extent the counterclaims are based on Phreesia's allegations and legal claims against Certify. Certify counters that Rule 9(b)'s heightened pleading requirements do not apply to its counterclaims, that is has plausibly alleged tortious interference and unfair competition consistent with Rule 8, and that the litigation privilege is inapplicable.
Rule 9(b) provides a heightened pleading standard for allegations of fraud. It states that, in “alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Such circumstances include “the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Weidman v. Exxon Mobil Corp., 776 F.3d 214, 219 (4th Cir. 2015) (quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999)). Allegations regarding a party's mindset, however, “may be alleged generally.” Fed.R.Civ.P. 9(b).
Phreesia contends Rule 9(b) applies to Certify's counterclaims because they sound in fraud. Certify responds that the heightened pleading standard does not apply because it is not claiming Phreesia committed any fraud against it, Providence, or any other third party. Rather, Certify asserts, its counterclaims are based on Phreesia's “false, defamatory, and disparaging statements and injurious falsehoods.” ECF 50, at 13.
It is well-settled that the “requirements of Rule 9(b) apply to all cases where the gravamen of the claim is fraud even though the theory supporting the claim is not technically termed fraud.” Adams v. NVR Homes, Inc., 193 F.R.D. 243, 250 (D. Md. 2000) (citing Pitten v Jacobs, 903 F.Supp. 937, 951 (D.S.C. 1995)). This is so because, as the Fourth Circuit has...
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