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Post Acute Medical, LLC v. Leblanc

United States District Court, M.D. Pennsylvania

September 16, 2019




         Presently pending before the Court is Defendant Christopher LeBlanc's and Defendant Meridian Hospital Systems Corporation's Amended Motion to Dismiss. (Doc. 21). The matter has been fully briefed, (Docs. 22, 25, 26), and is ripe for disposition. For the reasons that follow, the Motion shall be granted.

         I. BACKGROUND

         In accordance with the standard of review applicable to a motion to dismiss, the following facts are derived from Plaintiff's amended complaint and are viewed in the light most favorable to it.

         Plaintiff Post Acute Medical, LLC (“PAM”) is a healthcare provider that owns and operates long-term care hospitals. (Doc. 20 at ¶ 8). In 2013, PAM contracted with Defendant Meridian Healthcare Intelligence (“Meridian”) for Meridian to provide it with a user-friendly recordkeeping system. (Id. at ¶ 11). Because this arrangement necessarily required Meridian to access PAM's patient data, Meridian agreed to comply with HIPAA requirements and to safeguard PAM's confidential data. (Id. at ¶ 12-17). Meridian also agreed that all of the data it would access or create belonged to PAM and that said data would be returned to PAM upon request or upon termination of the business relationship. (Id. at ¶ 20).

         Over the next several years, PAM experienced issues with Meridian's performance. (Id. at ¶¶ 24-40). By 2018, PAM expressed its desire to develop and execute its own platform. (Id. at ¶ 41-42). Not wanting to lose PAM's business, however, Meridian offered PAM an equity interest in the company in exchange for a long-term contract. (Id. at ¶ 45). Nonetheless, before that deal was finalized, Meridian and PAM agreed to a one-year extension, memorialized in what the parties refer to as the Business Associate Addendum (“BAA”). (Id. at ¶ 46-49). The BAA was signed by PAM and Meridian and was personally guaranteed by Defendant Christopher LeBlanc (“LeBlanc”), Meridian's majority owner. (Id. at ¶ 50). Relevant to the instant motion, the BAA reiterated many of the limitations outlined in the parties' initial contract, including Meridian's obligation to safeguard PAM's data. (Id. at ¶ 51-62).

         On February 28, 2019, PAM notified Meridian that it did not intend to renew its agreement and made clear that Meridian should return all of PAM's sensitive data at or before the conclusion of the agreement's term. (Id. at ¶ 64). A series of failed negotiations to continue the relationship ensued, to no avail. (Id. at ¶¶ 67- 71).

         Shortly after the parties recognized that no further agreement would be reached, Meridian sued PAM and several of its Texas affiliates in Texas state court, alleging that PAM had tried to undercut Meridian by hiring an independent firm to reverse engineer Meridian's product. (Id. at ¶¶ 72-76). PAM and its Texas-based affiliates filed a motion to dismiss, which the Texas court denied. (Id. at ¶ 83). The matter is presently stayed pending PAM's appeal of that order. (Id.).

         Notwithstanding the fact that Meridian was still contractually obligated to provide its services to PAM, on May 8, 2019, Meridian shut down PAM's access to its data, resulting in what PAM characterizes as a massive disruption of service. (Id. at ¶ 85-86). PAM demanded that Meridian restore service-for which it was still paying-and that Meridian immediately return PAM's stored data. (Id. at ¶ 88). Meridian responded to PAM's demand by insisting that it was not obligated to do so and that, in fact, it had the right to destroy it. (Id. at ¶ 90).

         On May 15, 2019, PAM sent a second demand, (id. at ¶ 92), and, on May 24, 2019, PAM sent a third. (Id. at 95). On May 30, 2019, Meridian responded that it intended to destroy PAM's data on several of its platforms. (Id. at ¶ 97). Meridian demanded $8, 500.00 before it would return the data that remained on its other platforms. (Id.). On June 5, 2019, PAM's counsel verbally requested that LeBlanc specifically return the data. (Id. at ¶ 102). On June 10, 2019, PAM again demanded, in writing, the immediate return of its data. (Id. at 103). In response, Meridian again threatened to destroy it. (Id. at 104).

         On June 26, 2019, Meridian sought a temporary restraining order in Texas state court against Key Management Group, Inc., a co-defendant in Meridian's initial law suit. (Id. at ¶ 107). During a hearing on the matter, Meridian's counsel mentioned that LeBlanc had used its servers to access PAM's sensitive data. (Id. at ¶¶ 108-112). Specifically, PAM contends, LeBlanc had accessed the database to confirm the identity of an individual that was being discussed at the hearing.

         On July 17, 2019, PAM notified Meridian and LeBlanc that it intended to enforce provisions of the BAA which authorized PAM to monitor Meridian's compliance therewith. (Id. at ¶ 116-120). Meridian did not respond to PAM's request but instead asserted that the BAA was terminated and that Meridian was under no obligation to comply with it absent a court order. (Id. at ¶¶ 121-122).

         On July 2, 2019, PAM filed a three-count complaint against Meridian and LeBlanc in this Court. (Doc. 1). The following day, PAM filed a Motion for Temporary Restraining Order and a brief in support thereof. (Docs. 4, 5). On July 9, 2019, the Court held a telephonic status conference after which the parties agreed to a stipulated Order mandating that Meridian and LeBlanc retain all of PAM's data in its current form and precluding Meridian and LeBlanc from destroying, deleting, copying, using, mining, accessing, or distributing that data. (Doc. 15). This stipulated Order denied PAM's motion for temporary restraining order without prejudice. (Id.). On July 25, 2019, Meridian and LeBlanc filed a motion to dismiss and a brief in support thereof. (Docs. 17, 19).

         On August 8, 2019, PAM filed an amended complaint, the operative complaint in this case. (Doc. 20). In Count I, PAM avers that Meridian and LeBlanc violated the Defend Trade Secrets Act, 18 U.S.C. § 1836 et seq., by misappropriating PAM's confidential customer and vendor data. (Doc. 20 at ¶ 133). In connection therewith, PAM specifically avers that, this customer and vendor data “qualifies for trade secret protection under the Defend Trade Secret Act, ” (id. at ¶ 139), and that “the sole copy [of the data] resides on Meridian's servers.” (Id. at ¶ 133). In Count II, PAM contends that Meridian and LeBlanc violated the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq., by exceeding the scope of their authorized access of PAM's data when they accessed the database in open ...

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