United States District Court, D. Kansas
ACCOUNTABLE HEALTH SOLUTIONS, LLC, et al., Plaintiffs/Counterclaim Defendants,
WELLNESS CORPORATE SOLUTIONS, LLC, Defendant/Counterclaim Plaintiff.
MEMORANDUM AND ORDER
D. Crabtree United States District Judge.
case is about a business relationship that soured. Plaintiffs
and defendant entered into a contract requiring defendant to
provide biometric screening and wellness services to
plaintiffs' clients in exchange for payment made by
plaintiffs. But this contractual relationship ended when
plaintiffs allegedly fell behind on their payments to
defendant. Meanwhile, defendant allegedly stole one of
plaintiffs' clients. As a result, plaintiffs sued
defendant. Defendant responded with a Counterclaim.
matter comes before the court on two motions-both made by
defendant. In its first motion, defendant asks the court to
grant summary judgment in its favor on its Counterclaim for
breach of contract (Doc. 60). Defendant's second motion
asks the court to grant summary judgment against all of
plaintiffs' claims (Doc. 100). For reasons explained
below, the court denies defendant's Motion for Summary
Judgment on its Counterclaim. And, the court grants
defendant's Motion for Summary Judgment against
plaintiffs' claims in part, and it denies it in part. The
court explains why, below.
following facts are uncontroverted or, where controverted,
are stated in the light most favorable to plaintiffs as the
nonmoving party. Scott v. Harris, 550 U.S. 372, 378
Accountable Health Solutions, LLC (“AHS”) is a
limited liability company organized under Kansas law whose
sole member is Hooper Holmes. Hooper Holmes is a corporation
duly organized under New York law with its principal office
in Kansas. Hooper Holmes purchased AHS in early 2015.
Corporate Solutions, LLC (“WCS”) is a limited
liability company organized under Maryland law. Defendant has
two members: Fiona Gathright and Juliet Rodman. Both members
are residents of Maryland.
Master Service Agreement
March 4, 2014, plaintiff AHS and defendant WCS executed the
Master Service Agreement (“MSA”). When plaintiff
Hooper Holmes bought AHS in early 2015, the MSA became
binding on Hooper Holmes. The MSA required defendant to
provide biometric screening and wellness services to
plaintiffs' clients and, in return, required plaintiffs
to pay defendant for those services. Doc. 61-2 (MSA) ¶
1. Plaintiffs' clients paid plaintiffs for the services
defendant provided, about 90 days after defendant had
provided the services. The MSA required plaintiffs to pay
defendant within 45 days of receiving an invoice.
Id. ¶ 7. If plaintiffs did not pay as required,
the MSA allowed defendant to charge 1.5% interest per month
on the unpaid balance. Id. The parties made the MSA
effective on February 15, 2014, for a term of 36 months.
Id. ¶ 8. The MSA automatically renewed at the
end of that period-February 15, 2017- for another year unless
either party terminated it. Id.
other provisions of the MSA matter to this lawsuit. First,
the parties agreed that neither party would be liable to the
other “for loss of profits, loss of business, or
special, indirect, incidental, exemplary, consequential, or
punitive damages arising from the performance or
nonperformance of this agreement, or any acts or omissions
associated therewith.” Id. ¶ 11. Second,
the parties agreed they could amend the MSA “by secured
electronic e-mail or in writing signed by both Parties
hereto.” Id. ¶ 17. Third,
The failure by the Party at any time to require performance
by the other Party of any provision hereof shall not affect
in any way the right to require such performance at a later
time; nor shall the waiver by either Party of a breach of any
provision hereof be taken or be held to be a waiver of such
Id. ¶ 20. And last, the MSA prohibits defendant
from competing with plaintiffs. Specifically, defendant
cannot “encourage any [client of plaintiffs], either
directly or indirectly, to terminate its relationship with
plaintiffs” or “solicit or market
[defendant's] Services [directly] to [a client] of
[plaintiffs] in any way to compete with [plaintiffs].”
Id. ¶ 23(i). Also, the MSA provides that
defendant could not “use any confidential information,
intellectual property, or any other data or information
provided by [plaintiffs], or gained pursuant to [the MSA], to
compete in any way with [plaintiffs] . . . .”
Id. ¶ 23(ii).
2015, defendant contacted plaintiffs about an outstanding
balance they owed defendant under the MSA. Plaintiffs assured
defendant that they would pay the amount owed. On November 4,
2015, plaintiffs' Chief Financial Officer, Steven
Balthazor, emailed defendant's CFO, Jeff Taylor. Mr.
Balthazor explained that plaintiffs did not have adequate
funds on hand to pay defendant because plaintiffs typically
did not receive their clients' payments for
defendant's services until after plaintiffs' payments
to defendant were due. But Mr. Balthazor promised that
plaintiffs would pay at least $10, 000 per week on the
outstanding balance and increase that payment amount once
plaintiffs had more funds. Mr. Taylor acknowledged this
email, but replied that defendant intended to charge
plaintiffs 1.5% per month interest on the outstanding debt,
as the MSA permitted. Plaintiffs started making the $10, 000
weekly payments on November 16, 2015. Mr. Balthazor followed
up with Mr. Taylor on December 14, 2015. Mr. Balthazor
recognized that plaintiffs still owed extraordinary amounts,
but that plaintiffs would have more cash available by
mid-January 2016 to pay defendant. In February 2016,
plaintiffs increased their weekly payments to defendant to
$20, 000 each week. The highest outstanding balance owed by
plaintiffs was $592, 990 on November 12, 2015. Plaintiffs had
paid that balance down to $234, 807 by June 6, 2016.
Plaintiffs made no more payments after that date.
Materials Corporation of America d/b/a/ GAF
(“GAF”) was a longtime client of plaintiffs.
Plaintiffs earned roughly $225, 000 a year from GAF and GAF
had agreed with plaintiffs to accept services for them
through August 2016. This contract contained a renewal
provision that automatically renewed the contract every year
on August 1 unless GAF gave plaintiffs written notice on June
1 of that same year.
under the MSA, defendant had provided services to GAF several
times. Despite this arrangement, defendant's CEO, Fiona
Gathright, emailed Jennifer Silverman, defendant's Senior
Program Manager, on March 3, 2016. Ms. Gathright gave Ms.
Silverman permission to meet with GAF. And, on March 7, Aon
Hewitt, a consultant to GAF, contacted defendant to see if
defendant was interested in providing biometric screenings
directly to GAF. Then, defendant sent representatives to New
Jersey to give GAF a sales presentation on April 27, 2016. In
its discussions with GAF, defendant used plaintiffs'
pricing data. Shortly afterward, on May 6, 2016, GAF informed
defendant that it had decided to award defendant the contract
to provide health-screening services.
point in May 2016, GAF informed plaintiffs that it was in
discussions with defendant to provide health-screening
services directly. On June 9, 2016, GAF gave plaintiffs
written notice that it would no longer contract with them for
health and wellness needs. And after learning this news,
plaintiffs stopped paying defendant. They also filed this
lawsuit. In it, plaintiffs seek to recover lost profits from
defendant based on plaintiffs' contract with GAF.
Plaintiffs also seek to recover punitive damages. Defendant
then filed a Counterclaim against plaintiffs. It seeks the
unpaid balance under the MSA plus interest.
judgment is appropriate if the moving party demonstrates that
“no genuine dispute [about] any material fact”
exists and that it “is entitled to judgment as a matter
of law.” Fed.R.Civ.P. 56(a). When applying this
standard, the court views the evidence and draws inferences
in the light most favorable to the non-moving party.
Nahno-Lopez v. Houser, 625 F.3d 1279, 1283 (10th
Cir. 2010). A disputed “issue of fact is
‘genuine' ‘if the evidence is such that a
reasonable factfinder could return a verdict for the
non-moving party' on the issue.” Id.
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)). And an “issue of fact is
‘material' ‘if under the substantive law it
is essential to the proper disposition of the claim' or
defense.” Id. (quoting Adler v. Wal-Mart
Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)).
moving party bears “‘both the initial burden of
production on a motion for summary judgment and the burden of
establishing that summary judgment is appropriate as a matter
of law.'” Kannady v. City of Kiowa, 590
F.3d 1161, 1169 (10th Cir. 2010) (quoting Trainor v.
Apollo Metal Specialties, Inc., 318 F.3d 976, 979 (10th
Cir. 2002)). To carry this burden, the moving party
“‘need not negate the non-movant's claim, but
need only point to an absence of evidence to support the
non-movant's claim.'” Id. (quoting
Sigmon v. CommunityCare HMO, Inc., 234 F.3d 1121,
1125 (10th Cir. 2000)).
moving party meets its initial burden, the non-moving party
“‘may not rest upon its pleadings, but must set
forth specific facts showing a genuine issue for trial [on]
those dispositive matters for which it carries the burden of
proof.'” Id. (quoting Jenkins v.
Wood, 81 F.3d 988, 990 (10th Cir. 1996)); see also
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986);
Anderson, 477 U.S. at 248-49. “To accomplish
this, the facts must be identified by reference to
affidavits, deposition transcripts, or specific exhibits
incorporated therein.” Adler, 144 F.3d at 671
(citing Thomas v. Wichita Coca-Cola Bottling Co.,
968 F.2d 1022, 1024 (10th Cir. 1992)). “Unsubstantiated
allegations carry no probative weight in summary judgment
proceedings.” Bones v. Honeywell Int'l,
Inc., 366 F.3d 869, 875 (10th Cir. 2004) (citing
Phillips v. Calhoun, 956 F.2d 949, 951 n.3 (10th
Cir. 1992)). To survive summary judgment, the non-moving
party's “evidence, including testimony, must be
based on more than mere speculation, conjecture, or
surmise.” Id. (citing Rice v. United
States, 166 F.3d 1088, 1092 (10th Cir. 1999)).
judgment is not a “disfavored procedural
shortcut.” Celotex, 477 U.S. at 327. To the
contrary, it is an important procedure “designed
‘to secure the just, speedy[, ] and inexpensive
determination of every action.'” Id.
(quoting Fed.R.Civ.P. 1).
assert claims for breach of contract (Count I), breach of the
covenant of good faith and fair dealings (Count II), tortious
interference with contract (Count III), and tortious
interference with prospective business expectancies or
relationships (Count IV). Plaintiffs also seek a declaratory
judgment (Count V). All of plaintiffs' claims originate
in defendant's decision to contact and contract with
plaintiffs' former client, GAF. Defendant asserts a
breach of contract counterclaim, alleging that plaintiffs
breached their duty to pay defendant as the MSA required.
has filed two summary judgment motions: one seeking summary
judgment on its Counterclaim (Doc. 60) and one seeking
summary judgment against all of plaintiffs' claims (Doc.
100). Before turning to the merits of defendant's
motions, the court must determine whether it has subject
matter jurisdiction over this case and, if so, what law to
apply to the claims on defendant's motions.
Subject Matter Jurisdiction
court has an independent obligation to satisfy itself that
subject matter jurisdiction exists. Henderson ex rel.
Henderson v. Shinseki, 562 U.S. 428, 434 (2011). Both
parties have agreed that this court has subject matter
jurisdiction under 28 U.S.C. § 1332, commonly called
diversity jurisdiction. See Doc. 120 ¶ 1.a.
diversity jurisdiction to exist under this provision, the
parties must be citizens of different states and the matter
in controversy must exceed $75, 000. Here, the matter in
controversy is $710, 436.
parties to be citizens of different states, “no
plaintiff may be a citizen of the same state as any
defendant.” Grynberg v. Kinder Morgan Energy
Partners, L.P., 805 F.3d 901, 905 (10th Cir. 2015). The
court determines a business entity's citizenship
according to its organizational structure. If the business is
organized as a corporation, it is a citizen of the state
where it is incorporated and where its principal place of
business is located. 28 U.S.C. § 1332(c)(1); Newsome
v. Gallacher, 722 F.3d 1257, 1267 (10th Cir. 2013). If
the business is a limited liability company, the court
determines its citizenship by the citizenship of each one of
its members. See Siloam Springs Hotel, LLC v. Century
Sur. Co., 781 F.3d 1233, 1234 (10th Cir. 2015)
(“Like every other circuit to consider this question,
this court concludes an LLC, as an unincorporated
association, takes the citizenship of all its
members.”); see also Birdsong v. Westglen Endoscopy
Ctr., L.L.C., 176 F.Supp.2d 1245, 1248 (D. Kan. 2001).
neither plaintiff is from the same state as defendant.
Plaintiff AHS is a limited liability company whose sole
member is Hooper Holmes, the other plaintiff. Hooper Holmes
is a corporation incorporated under New York law and has its
principal place of business in Kansas. Plaintiffs thus are
citizens of New York and Kansas. Defendant also is a limited
liability company. Its only two members are citizens of
Maryland. Defendant thus is a citizen of Maryland. Because
the parties ...