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UHSPRO, LLC v. Secure Documents, Inc.

United States District Court, D. Utah

June 23, 2017

UHSPRO, LLC, Plaintiff,
v.
SECURE DOCUMENTS, INC., doing business as MED-R MEDICAL SERVICES, Defendant.

          MEMORANDUM DECISION AND ORDER DENYING PRELIMINARY INJUNCTION

          JILL N. PARRISH, Judge United States District Court.

         Before the court is plaintiff UHSpro, LLC's motion for a TRO and for a preliminary injunction against defendant Secure Documents, Inc. (hereinafter, Med-R). [Docket 7');">7]. The court held an evidentiary hearing on the motion on May 25, 2017');">7. Because Med-R had notice of this motion, filed an opposition, and participated in the hearing on the motion, UHSpro's request for a TRO is moot. The court, therefore, treats UHSpro's motion as a motion for a preliminary injunction. The court DENIES the motion.

         FINDINGS OF FACT

         1. UHSpro, LLC was formed in February, 2015. [Tr. 17');">7].

         2. On February 26, 2015, UHSpro executed a sales contract with Med-R, an established company with existing relationships with medical practices in a number of western states. [Tr. 42]. Although the contract was signed in February, 2015, the document recited that it was executed on November 18, 2014 and was effective as of that date. [Ex. 2].

         3. The sales contract stated that UHSpro “owns exclusive and non-exclusive rights in the Americas and parts of Europe . . . for the sale, distribution and servicing of bio-monitoring screening devices and all other products and Product related thereto (collectively, the ‘Product').” The contract designated Med-R “as an authorized non-exclusive independent representative to sell and promote all Product provided by” UHSpro. Med-R warranted that it would “devote such time, energy and skill on a regular and consistent basis as is necessary to sell and promote the sale of [UHSpro's] Product during the term of [the] Agreement.” [Ex. 2].

         4. The only biomonitoring screening device for which UHSpro had “exclusive and non-exclusive rights” at the time the contract was signed was the MaxPulse device. The parties to the contract understood that the defined term “Product” in the sales contract referred to the MaxPulse device and that a new agreement would have to be negotiated for any additional products to be marketed.

         5. The MaxPulse device measures a patient's heartbeat. UHSpro also represents that the device can determine if the patient's arteries are partially closed or hardened. [Tr. 30].

         6. Under the contract, Med-R would use its contacts with doctors to place the device with medical practices. Doctors would then use the device on patients and bill insurance companies, Medicare, Medicaid, and the patients themselves for the testing. The doctors would then retain a portion of the money collected for these tests and pay the rest to UHSpro and Med-R, which would split the remaining net revenue evenly.

         7');">7. In the spring of 2015, concerns were raised that the MaxPulse device did not meet the billing requirements for some of the tests that the device allegedly performed. After reviewing the device, UHSpro decided to retrofit the Max Pulse devices with new components with the goal of expanding the number of tests that the device could properly perform and that physicians could bill to patients. [Tr. 168-69; Ex. 103].

         8. By August of 2015, UHSpro and Med-R had decided to abandon the upgraded MaxPulse device all together. [Tr. 17');">71; Exs. 105, 106]. The parties decided instead to market a more expensive RM-3A device that was manufactured by a different company. The parties concluded that the RM-3A was more reliable than the MaxPulse and that it could be used to perform a greater number of tests. As a result, UHSpro and Med-R concluded that the RM-3A could be used to increase the patient's bill and produce greater profits for the physician customers and themselves. [Tr. 17');">72-7');">74, 239-41; Ex. 104].

         9. Therefore, in August 2015, the parties abandoned the February 26, 2015 contract to market and distribute the MaxPulse device.

         10. UHSpro and Med-R agreed to move forward with a new arrangement to market the RM-3A device. Med-R agreed to an arrangement whereby UHSpro would purchase the RM-3A devices and Med-R would pay a monthly rental fee for each device. The parties agreed to the arrangement on a “month-to-month” basis with the understanding that Med-R would need to commit to a three month minimum term for each. Device put into service. UHSpro and Med-R would continue to evenly split the net revenue derived from the RM-3A. [Tr. 239; Exs. 105, 106].

         11. In October, 2015, UHSpro proposed that the parties execute a new partnership agreement to reflect the new agreement to market the RM-3A device. UHSpro used the previous MaxPulse agreement as a template, and drafted a new contract that incorporated the previously agreed upon distribution and marketing arrangement for the RM-3A. UHSpro then emailed the draft contract to Med-R for approval, but Med-R refused to sign it. [Ex. 107');">7]. Med-R was concerned about the problems it had experienced with the MaxPulse device and did not want to enter into a long-term contract.

         12. In the latter part of 2016, UHSpro and Med-R agreed to begin transitioning to yet another device, the TM-Flow, which could support even higher billing rates to patients. UHSpro purchased new TM-Flow devices and began to retrofit some of the RM-3A devices so that they effectively became TM-Flow devices. [Tr. 65-68]. The parties distributed the TM-Flow devices under the same month-to-month agreement they had previously used for the RM-3A device. [Tr. 17');">78, 194-95].

         13. In January, 2017');">7, Med-R conducted a financial analysis of the month-to-month arrangement with UHSpro and concluded that it needed a higher percentage of the net revenue derived from the RM-3A and TM-Flow devices in order to make the arrangement profitable. In March, 2017');">7, Med-R informed UHSpro that it required 65% of the net revenue from the devices, leaving 35% for UHSpro. UHSpro balked at this change to the revenue split, and Med-R decided to terminate the month-to-month leasing arrangement. Except for one device, Med-R returned all of the leased RM-3A and TM-Flow devices to UHSpro. Med-R acquired TM-Flow devices from another distributer and provided the devices to existing customers. Med-R offered to split the existing clients with UHSpro, but UHSpro declined the offer. [Tr. 249-52].

         14. UHSpro sued Med-R, asserting a number of claims. [Docket 2]. UHSpro also filed this motion for a preliminary injunction. [Docket 7');">7]. In the motion, UHSpro requests that this court enter an injunction that orders Med-R to comply with 15 separate mandates. The requested injunction would, among other things, order Med-R

a. not to breach the February 26, 2015 sales contract,
b. to continue to do business with UHSpro and equally share net revenues derived from all clients,
c. not to utilize or copy various alleged trade ...

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