Value Health Solutions Inc. v. Pharmaceutical Research Associates, Inc.
| Decision Date | 05 April 2021 |
| Docket Number | 18-CV-12318 |
| Parties | VALUE HEALTH SOLUTIONS INC. and NAGARAJAN PARTHASARATHY, Plaintiffs, v. PHARMACEUTICAL RESEARCH ASSOCIATES, INC. and PRA HEALTH SCIENCES, INC., Defendants. |
| Court | Superior Court of North Carolina |
THIS MATTER comes before the Court on Defendants Pharmaceutical Research Associates, Inc. ("PRA, Inc.") and PRA Health Sciences, Inc.'s ("PRAHS"; collectively Defendants will be referred to as "PRA," in the singular, except as otherwise required) Motion for Summary Judgment ("PRA's Motion," ECF No. 110) and Plaintiffs Value Health Solutions Inc. ("VHS") and Nagarajan Parthasarathy's ("Parthasarathy") Motion for Summary Judgment. ("Plaintiffs' Motion," ECF No. 115; collectively, PRA's Motion and Plaintiffs' Motion are the "Motions").
THE COURT, having considered the Motions, the evidence filed by the parties, the briefs submitted in support of and in opposition to the Motions, the arguments of counsel at the hearing on the Motions, the applicable law, and other appropriate matters of record, CONCLUDES that PRA's Motion should be GRANTED, and Plaintiffs' Motion should be GRANTED, in part, and DENIED, in part.
Mainsail Lawyers, by David Glen Guidry and Joseph Kellam Warren, for Plaintiffs Value Health Solutions Inc. and Nagarajan Parthasarathy.
Barnes & Thornhill, LLP, by John M. Moye, and Allen R. Baum, and Kilpatrick Townsend & Stockton LLP, by Joe P. Reynolds for Defendants Pharmaceutical Research Associates, Inc. and PRA Health Sciences, Inc.
1. This matter arises from bitter disputes between the parties surrounding PRA's acquisition of VHS, its proprietary software, and Parthasarathy's employment. The action was filed in October 2018, and the parties engaged in lengthy and extensive discovery involving the taking of at least seventeen depositions and the exchange of many thousands of documents. During the litigation the parties sought numerous orders sealing documents filed with the Court. Unfortunately, in presenting the Motions to the Court, the parties have filed hundreds of individual exhibits consisting of thousands of pages. The exhibits were filed in six[1] separate filings, some of which consisted of dozens of individual exhibits contained in a single, multi-hundred page and unindexed .pdf file. As a result, the Court's review of the record has been exceedingly difficult and time consuming. To expedite ruling on the Motions and to simplify reference to the evidence in the record, the Court has chosen to limit citation to the record to the extent possible and, in many cases, cites to those portions of the parties' briefs containing reference to the relevant evidence rather than the exhibits containing the evidence.
2. PRA is a large, publicly traded, contract research organization ("CRO") that provides a range of clinical trial services to large pharmaceutical companies and biotechnology companies around the globe. PRA is headquartered in Raleigh, North Carolina, employs more than 17, 500 employees worldwide, and has participated in approximately 4, 000 clinical trials across the globe, resulting in the regulatory approval of over 95 drugs. At all times relevant to this matter, Colin Shannon ("Shannon") was PRA's Chief Executive Officer, and Mike Irene ("Irene") was PRA's Executive Director of IT. (PRA's Br. Supp. of Mot. For SJ, ECF Nos. 111 [SEALED] and 113 [Public], at p. 1.)
3. PRA uses clinical trial management software ("CTMS") to assist its customers with clinical trials. The CTMS used by PRA is critical to the services PRA provides to its customers. In 2014, PRA was using a CTMS system created by Seibel. (Id.)
4. Parthasarathy founded VHS. In 2013, VHS developed a set of clinical trial software applications called ClinTrial Max ("CTMax"), Cloud Max, and Info Max (collectively, the "Solutions"). CTMax was a Salesforce®-based CTMS. (Id. at p. 2; Plfs.' Br. Supp. Mot. For SJ, ECF Nos. 116 [SEALED] and 117.1 [Public], at pp. 2-3.)
5. In 2014 PRA's IT department was pursuing a transition to a Salesforce® environment. In April 2014, PRA approached Parthasarathy about acquiring CTMax, and Plaintiffs and PRA subsequently engaged in a year-long period of negotiation and due diligence aimed at PRA's acquisition of the Solutions. In addition to negotiating over PRA's purchase of the Solutions in order to integrate the software into PRA's clinical trial management environment, Shannon and Parthasarathy discussed the potential for selling a stand-alone CTMS software to PRA's customers. (ECF Nos. 111/113, at pp. 2-3.)
6. Between April and October 2014, as part of the due diligence process, VHS provided PRA full access to the software code for CTMax, and PRA performed testing and analysis to understand its functionality. This included a gap analysis which allowed PRA to learn CTMax's capabilities and identify the functions that PRA wanted to further develop after acquiring the software. In doing so, it became clear that CTMax had several functional gaps compared to other CTMS applications in the industry, including the XXXXX CTMS then in use by PRA, and PRA advised Parthasarathy of these gaps. (Id. at p. 3.) In July 2014, Irene prepared a list of key product enhancements that PRA would need to "close the gap between CTMax and [PRA's] current CTMS." (Id.)
7. On October 15, 2014, PRA's Health Executive Vice President and Chief Financial Officer, Linda Baddour, sent Parthasarathy a document titled "Non-Binding Letter of Intent" ("LOI"). The LOI outlined PRA's proposal for the acquisition of the Solutions including, inter alia, as follows:
(Id. at p. 2.) The copy of the LOI provided in the record is not signed by VHS or Parthasarathy, but Plaintiffs do not dispute that they entered into the LOI.
9. Effective May 21, 2015, PRA, VHS, and Parthasarathy entered into an Asset Purchase Agreement ("APA") for the purchase of the Solutions. (ECF No. 112.1, at pp. 348-416.) The APA is governed by Delaware law.
10. Under the APA, Plaintiffs agreed to sell the Solutions to PRA for a payment of PRA stock and cash of approximately $2.5 million at closing, and potential "Contingent Payments" tied to achievement of certain milestones. (Id. at pp. 351- 52.) The first group of contingent payments were three separate payments dependent on, respectively: the integration of CTMax into PRA's clinical trial management environment; the completion of the product enhancements to [XXXXX] identified by the gap analysis; and completion of the migration of PRA clinical trial studies into CTMax ("Development Milestones"). (Id. at pp. 351, 387-90.) More specifically, Article 2.6 of the APA provides:
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