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DICE v. CLINICORP

May 17, 1995

C. WAYNE DICE, JR., Plaintiff,
v.
CLINICORP, INC., ROBERT S. GOLDSAMT, C. THOMAS McMILLEN, McMILLEN & COMPANY, INC., and MID-ATLANTIC CHIROPRACTIC, INC., Defendants.



The opinion of the court was delivered by: D. BROOKS SMITH

 Smith, District J.

 I. Introduction

 Plaintiff's causes of action involve the August 1993 sale of plaintiff's chiropractic business to CliniCorp, as well as plaintiff's resulting employment agreement with Mid-Atlantic. As explained in greater detail below, the relationship among the parties soon deteriorated, and plaintiff eventually filed the instant action.

 On March 15, 1995, defendants CliniCorp and Mid-Atlantic filed an Emergency Application for Temporary Restraining Order and Motion for Preliminary Injunction (Docket No. 4). On March 30, 1995, this Court held a hearing on defendants' motion for preliminary injunctive relief.

 At that hearing, CliniCorp withdrew its motion for a preliminary injunction, and the hearing proceeded only on behalf of Mid-Atlantic. See Docket No. 15 ("Hearing Transcript"), at 3-4. At the conclusion of the hearing, the Court directed the parties to file supplemental memoranda, setting forth proposed findings of fact and legal argument. Counsel was specifically instructed to address the issue of whether Mid-Atlantic had demonstrated the threat of irreparable harm such as to warrant the issuance of a preliminary injunction. Id., at 23-31.

 For the reasons explained below, I find that defendant Mid-Atlantic has failed to establish that it will suffer irreparable harm in the absence of preliminary injunctive relief. Accordingly, Mid-Atlantic's request for a preliminary injunction is denied. Because I find that Mid-Atlantic has failed to satisfy one of the essential elements for obtaining an injuntion, I need not reach the other elements.

 II. Findings of Fact

 1. CliniCorp is a Delaware corporation that is engaged in the business of managing chiropractic and other health care-related clinics. Its common stock is traded on the American Stock Exchange. Hearing Transcript, at 6.

 2. Mid-Atlantic is a professional corporation that provides chiropractic services in the Commonwealth of Pennsylvania. Id., at 6-7.

 3. The sole director, sole corporate officer and majority shareholder for Mid-Atlantic is George L. Jenkins, Jr., a chiropractor located in Lebanon, Pennsylvania. Id., at 138-39.

 4. Mid-Atlantic operates under a comprehensive management agreement with CliniCorp. Pursuant to that agreement, Mid-Atlantic is to employ professionals and "technically provide the services to patients" at any CliniCorp clinic in Pennsylvania in exchange for a contractually agreed-upon fee. Hearing Transcript, at 7; Plaintiff's Hearing Exhibit No. 3 ("Management Agreement").

 5. The reason for this particular management arrangement between CliniCorp and Mid-Atlantic, according to CliniCorp, is:

 
CliniCorp generally, . . . as a matter of . . . state law, because of a doctrine called the Corporate Practice of Medicine cannot itself, as a Delaware corporation, a non-professional corporation, treat patients. Therefore, it enters into comprehensive management contracts with the professional corporations that provide the services to patients. Those professional corporations [such as Mid-Atlantic] employ the professionals who render services at the clinic site.

 Hearing Transcript, at 7.

 6. CliniCorp attempts to increase the number of clinic locations where it provides its management services -- to "cluster clinics" -- because "the more clinics you have, theoretically, the more money you make, as long as the clinic overheads at that location don't exceed the cost to CliniCorp of providing its management services." Id., at 17-19.

 8. Pursuant to the terms of the Management Agreement, CliniCorp is to receive at least eighty percent (80%) of the gross collections from any clinic managed by CliniCorp in Pennsylvania, and Mid-Atlantic is to pay the professional staff's salary and benefits from the twenty percent (20%) that Mid-Atlantic retains. Mid-Atlantic's reason for entering into such an arrangement is to "make[] money . . . . To the extent [Mid-Atlantic] has money left after it pays its management fee [80% to CliniCorp] and pays its doctors, whatever is left to [Mid-Atlantic], it makes." Management Agreement, at P 8; Hearing Transcript, at 12-13, 17.

 9. Prior to August 25, 1993, plaintiff operated a chiropractic clinic located at 1004 West View Park Drive (the "Original Clinic") through an entity known as Dice Chiropractic, P.C. ("Dice Chiropractic"). Plaintiff provided professional chiropractic services at the Original Clinic. Hearing Transcript, at 13-14, 149-150.

 10. On August 25, 1993, plaintiff and Dice Chiropractic entered into an agreement with CliniCorp, pursuant to which CliniCorp acquired the "practice assets" of Dice Chiropractic, which included the physical equipment and accounts receivables of Dice Chiropractic. Plaintiff's Hearing Exhibit No. 8 ("Acquisition Agreement"); Hearing Transcript, at 15, 149-50.

 11. In exchange for the Dice Chiropractic assets, CliniCorp agreed to deliver to plaintiff 506,074 shares of unregistered common stock of CliniCorp. CliniCorp was required to cause a Registration Statement to become effective within 120 days of the closing of the Acquisition Agreement for the purpose of registering plaintiff's shares received for the clinic. Acquisition Agreement, P 2.2; Hearing Transcript, at 37-38.

 12. Pursuant to the Acquisition Agreement between Dice and CliniCorp and pursuant to the Management Agreement between CliniCorp and Mid-Atlantic, CliniCorp took over virtually every aspect of the operation and management of the Original Clinic. Management Agreement, P 2; Hearing Transcript, at 11-12

 13. Also on August 25, 1995, as required by the Acquisition Agreement, plaintiff entered into an Employment Agreement with Mid-Atlantic. Hearing Transcript, at 14; Acquisition Agreement, P 12.3; ...


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