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Cardiovascular Support v. Specialtycare, Inc.

United States District Court, M.D. Tennessee, Nashville Division

February 18, 2015

CARDIOVASCULAR SUPPORT, ET AL., Plaintiffs,
v.
SPECIALTYCARE, INC., ET AL., Defendants.

MEMORANDUM

TODD J. CAMPBELL, District Judge.

Pending before the Court are Plaintiffs' Motion for Partial Summary Judgment (Docket No. 85) and Defendants' Motion for Summary Judgment (Docket No. 73). For the reasons stated herein, the Court will DENY Plaintiffs' motion and GRANT Defendants' motion.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The facts set forth below are undisputed unless otherwise indicated. Plaintiffs (collectively referred to as "Cardiovascular Support") provide perfusion services and perfusion-related goods to various hospitals in Texas. Defendants (collectively referred to as "SpecialtyCare") provide a variety of clinical services, including perfusion services, to hospitals across the country. Perfusion services are provided to patients who are having open-heart surgery. The perfusionist operates the heart/lung bypass machine, which provides life support to a patient during open heart surgery.

On December 9, 2010, Cardiovascular Support and SpecialtyCare entered into a non-disclosure agreement, the purpose of which was to protect Cardiovascular Support as it provided SpecialtyCare's mergers and acquisitions team with qualified access to its confidential business information so that SpecialtyCare could evaluate a possible investment, acquisition, divestiture, merger, or other strategic acquisition of Cardiovascular Support. Ultimately, no such transaction occurred.

At the time the non-disclosure agreement was executed, Cardiovascular Support had an existing contract to provide perfusion services and products to Baylor University Medical Center ("Baylor") in Dallas County, Texas. Cardiovascular Support's contract with Baylor expired in mid-2011, about the same time that Cardiovascular Support and SpecialtyCare entered into the non-disclosure agreement. Cardiovascular Support attempted to negotiate a new contract with Baylor. Lloyd Yancey was the individual with Cardiovascular Support who was responsible for negotiations with Baylor. Mike Sanborn, Baylor's Vice President of Cardiovascular Services, handled the negotiations for Baylor, although there were other decision makers at Baylor as well.

Baylor was satisfied with Cardiovascular Support's perfusionist services but felt that it could save money by purchasing its own supplies. Sanborn Dep. 8-9 (Docket No. 65-1). Baylor considered bringing both services and supplies in house, and extended Cardiovascular Support's contract by ninety days to allow time to hire its own perfusionists. Sanborn Dep. 11, 13. When it encountered difficulty with bringing perfusionist services in house, Baylor next considered seeking a service-only contract in which it contracted with an outside company for perfusionist services, with the intention to purchase its own supplies in order to save money. Sanborn Dep. 15.

At some point in this process, Baylor learned that one of its affiliate hospitals in another city already had a service-only contract with SpecialtyCare. Indeed, Jonathan Womack, who was the Vice President of Sales for SpecialtyCare and its various predecessors-in-interest, testified that he had been trying to get SpecialtyCare "in the door at Baylor for a while before 2011." Womack Dep. 29 (Docket No. 70). Baylor solicited a service-only bid from SpecialtyCare. Sanborn Dep. 18. Mr. Sanborn, who handled this matter for Baylor, testified that Baylor had a standardized form with the information it wanted included in the bid. Sanborn Dep. 20. SpecialtyCare used Baylor's form to create its proposal. Baylor liked SpecialtyCare's proposal, which in addition to having the benefit of being a services-only bid, also included monitoring, bench marking, and some other services Baylor was not currently getting from Cardiovascular Support, such as blood management. Sanborn Dep. 24.

At the same time Baylor was exploring the possibility of entering into a services-only contract with SpecialtyCare, Mr. Sanborn was also considering the possibility of Baylor's continuing to contract for perfusionist services with Cardiovascular Support. The primary point of negotiation between Baylor and Cardiovascular Support was whether, and how much, Cardiovascular Support would lower its charges for supplies. At Mr. Sanborn's request, Cardiovascular Support created a proposal that would eliminate about one million dollars of expenses from supplies. However, Mr. Sanborn did not like that the bid was on a flat-fee basis, which he thought would not be financially advantageous to Baylor. Sanborn Dep. 16. In response to Baylor's stated desire to purchase its own supplies, Cardiovascular Support indicated it would be willing to enter a contract in which Baylor would purchase its own heart valves only if Baylor paid Cardiovascular Support a ten percent handling fee and agreed to disclose the pricing it received from the manufacturers of the heart valves. Yancey Dep. 115 (Docket No. 64). As Mr. Yancey himself testified on behalf of Cardiovascular Support, Baylor was not comfortable with that proposal because Baylor had confidentiality agreements with its vendors. Yancey Dep. 115. The discussions between Cardiovascular Support and Baylor were all verbal. The parties never exchanged draft agreements related to the contract renewal. Yancey Dep. 116. Mr. Yancey testified that Mr. Sanborn assured him that Cardiovascular Support would not lose the contract for services, as Baylor was only considering changing the way it obtained supplies. Yancey Dep. 117. Mr. Sanborn testified, to the contrary, that he "would not have made that statement." Sanborn Dep. 16. In any event, Mr. Sanborn testified that Cardiovascular Support's proposals were not "adequate" and that Baylor was "not prepared to move forward with the renewal." Sanborn Dep. 18. He further testified that there was "zero chance" Baylor would renew the contract as written because of Baylor's "significant amount of concern over the pricing of the supplies." Sanborn Dep. 10. On October 14, 2011, Baylor and SpecialtyCare entered into a services-only contract, with services to begin December 1, 2011.

The gravamen of Plaintiffs' complaint is that SpecialtyCare's merger and acquisitions team disclosed Plaintiffs' confidential information to its sales team, which in turn improperly used the confidential information to obtain the contract with Baylor for provision of perfusionist services. Defendants dispute both the allegation that their merger and acquisitions team gave the confidential information to the sales team and also that it used the confidential information in creating its proposal for the Baylor contract.

On March 29, 2013, Cardiovascular Support brought this action in state court in Dallas County, Texas. On May 6, 2013, Defendants removed the case to the United States District Court for the Northern District of Texas on the basis of diversity of citizenship, pursuant to 28 U.S.C. ยง 1332. Plaintiffs are citizens and residents of the State of Texas. Defendant companies were incorporated in states other than Texas and have their principal places of business in Tennessee. On May 28, 2013, Plaintiffs filed an Amended Complaint. On October 22, 2013, this action was transferred from the Northern District of Texas to this Court by agreement of the parties. Plaintiffs assert claims for breach of contract, promissory estoppel, fraud, negligent misrepresentation, tortious interference with prospective relations, and trade secret misappropriation. Defendants raise defenses of statute of limitations, contributory negligence, comparative negligence of third parties, failure to mitigate damages, release, waiver, estoppel, laches, unclean hands, and accord and satisfaction.

Plaintiffs move for summary judgment as to liability on each of its claims, but not as to damages. They also move for summary judgment as to each of Defendants' defenses. Defendants move for summary judgment dismissing all claims in Plaintiffs' First Amended Petition.

ANALYSIS

I. Summary Judgment ...


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