Tech Pharmacy Services, LLC v. Alixa Rx LLC et al
MEMORANDUM OPINION AND ORDER Granting in Part and Denying in Part re 221 SEALED MOTION Defendants' Motion for Partial Summary Judgment as to Plaintiff's Fraud Claims, Equitable Estoppel Claims, and all Remaining Claims Against the Fillmore Entites filed by Golden Gate National Senior Care, Fillmore Strategic Investors, LLC, Fillmore Strategic Management, LLC, Fillmore Capital Partners, LLC, Alixa Rx LLC. Tech Pharmacy Services, LLCs fraud, misappropriation of tr ade secrets, and breach of contract claims against Defendants Fillmore Strategic Investors, LLC and Fillmore Strategic Management, LLC are DISMISSED. It is further ORDERED that Defendants motion is DENIED in all other respects. Signed by Judge Amos L. Mazzant, III on 7/25/17. (cm, ) Modified on 7/25/2017 (cm, ).
United States District Court
EASTERN DISTRICT OF TEXAS
TECH PHARMACY SERVICES, LLC
ALIXA RX LLC, GOLDEN GATE
NATIONAL SENIOR CARE LLC d/b/a
GOLDEN LIVINGCENTERS, FILLMORE
CAPITAL PARTNERS, LLC, FILLMORE
STRATEGIC INVESTORS, LLC, and
Civil Action No. 4:15-CV-766
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Motion for Partial Summary Judgment as to
Plaintiff’s Fraud Claims, Equitable Estoppel Claims, and All Remaining Claims Against the
Fillmore Entities (Dkt. #221). After reviewing the relevant pleadings, the Court grants in part
and denies in part Defendants’ motion.
Beginning in 2008, Tech Pharmacy Services, LLC (“Tech Pharmacy”) engaged in
discussions with Golden Gate National Senior Care LLC d/b/a Golden LivingCenters (“GLC”)
about providing its remote packaging and dispensing system to GLC facilities.
negotiations, Tech Pharmacy and GLC entered into two non-disclosure agreements (“NDAs”),
one in 2008 and another in 2009, to facilitate discussions between the parties and allow GLC to
access Tech Pharmacy’s virtual data room. On March 11, 2010, GLC sent a letter of intent to
Tech Pharmacy, expressing interest in purchasing 85% of the company for $15 million. Two
weeks later, Tech Pharmacy sent a counter-proposal, offering the sale of 45% of the company for
$25 million. The next day, GLC contacted Tech Pharmacy and stated that it was ceasing
discussions and terminating any pilot programs. In October 2012, GLC publicly launched its
own pharmacy named Alixa Rx LLC (“Alixa”).
On November 2, 2015, Tech Pharmacy filed suit against Alixa and GLC, alleging patent
infringement. On January 22, 2016, Tech Pharmacy amended its complaint to add state law
claims of fraud, breach of contract, trade secret misappropriation, and equitable estoppel to the
original patent infringement claims.
On September, 1, 2016, Plaintiff further amended its
complaint to add Fillmore Capital Partners LLC, Fillmore Strategic Management LLC, and
Fillmore Strategic Investors LLC (collectively, the “Fillmore Defendants,” with Alixa and GLC,
“Defendants”) to the state causes of action (Dkt. #83).
On March 31, 2017, Defendants filed their motion for partial summary judgment (Dkt.
#221). On April 21, 2017, Tech Pharmacy filed its response (Dkt. #246). On April 28, 2017,
Defendants filed their reply (Dkt. #252). On May 4, 2017, Tech Pharmacy filed its sur-reply
The purpose of summary judgment is to isolate and dispose of factually unsupported
claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). Summary judgment
is proper under Rule 56(a) of the Federal Rules of Civil Procedure “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A dispute about a material fact is genuine when “the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). Substantive law identifies which
facts are material. Id. The trial court “must resolve all reasonable doubts in favor of the party
opposing the motion for summary judgment.” Casey Enters., Inc. v. Am. Hardware Mut. Ins.
Co., 655 F.2d 598, 602 (5th Cir. 1981).
The party seeking summary judgment bears the initial burden of informing the court of its
motion and identifying “depositions, documents, electronically stored information, affidavits or
declarations, stipulations (including those made for purposes of the motion only), admissions,
interrogatory answers, or other materials” that demonstrate the absence of a genuine issue of
material fact. Fed. R. Civ. P. 56(c)(1)(A); Celotex, 477 U.S. at 323. If the movant bears the
burden of proof on a claim or defense for which it is moving for summary judgment, it must
come forward with evidence that establishes “beyond peradventure all of the essential elements
of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). Where
the nonmovant bears the burden of proof, the movant may discharge the burden by showing that
there is an absence of evidence to support the nonmovant’s case. Celotex, 477 U.S. at 325; Byers
v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the movant has carried its
burden, the nonmovant must “respond to the motion for summary judgment by setting forth
particular facts indicating there is a genuine issue for trial.” Byers, 209 F.3d at 424 (citing
Anderson, 477 U.S. at 248–49). A nonmovant must present affirmative evidence to defeat a
properly supported motion for summary judgment. Anderson, 477 U.S. at 257. Mere denials of
material facts, unsworn allegations, or arguments and assertions in briefs or legal memoranda
will not suffice to carry this burden.
Rather, the Court requires ‘“significant probative
evidence’” from the nonmovant to dismiss a request for summary judgment. In re Mun. Bond
Reporting Antitrust Litig., 672 F.2d 436, 440 (5th Cir. 1982) (quoting Ferguson v. Nat’l Broad.
Co., 584 F.2d 111, 114 (5th Cir. 1978)). The Court must consider all of the evidence but “refrain
from making any credibility determinations or weighing the evidence.”
Turner v. Baylor
Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
Defendants move for summary judgment, arguing a lack of genuine issues of material
fact concerning: (1) whether Defendants as a whole committed fraud by acquiring Tech
Pharmacy’s confidential information in violation of an NDA; (2) whether the Fillmore
Defendants are liable for fraud, misappropriation of trade secrets, and breach of contract;
(3) whether Tech Pharmacy can rely on equitable estoppel as an affirmative defense. The Court
will address each of these arguments separately.
Fraud Against Defendants
Defendants contend Tech Pharmacy cannot sustain a fraud claim since the undisputed
evidence shows it was not actually deceived. Defendants assert that Tech Pharmacy knew GLC
was considering forming its own pharmacy and exploring other business ventures besides its
relationship with Tech Pharmacy. Because Tech Pharmacy was aware of these facts, Defendants
assert that they did not make any false misrepresentations that Tech Pharmacy acted upon, relied
upon, and was subsequently injured by.
Tech Pharmacy’s fraud claim involves whether Defendants fraudulently induced Tech
Pharmacy to enter into the 2009 NDA. Tech Pharmacy contends Defendants misrepresented that
they would not use Tech Pharmacy’s confidential information accessed under the 2009 NDA to
start their own pharmacy.
To succeed in its fraud claim, Tech Pharmacy must show (1)
Defendants made material misrepresentation; (2) such misrepresentation was made falsely or
recklessly without any knowledge of its truth; (3) Defendants intended Tech Pharmacy to act
upon the misrepresentation; (4) Tech Pharmacy acted in reliance on the misrepresentation; and
(5) suffered injury. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d
323, 337 (Tex. 2011) (citation omitted). A representation is material if “a reasonable person
would attach importance to [it] and would be induced to act on the information in determining
his choice of actions in the transaction in question.” Id. (quoting Smith v. KNC Optical, Inc.,
296 S.W.3d 807, 812 (Tex. App.—Dallas 2009, no pet.). Fraudulent inducement arises in the
context of a contract and the elements of fraud must be established as they relate to an agreement
between the parties. Haase v. Glazner, 62 S.W.3d 795, 798–99 (Tex. 2001).
The Court finds Tech Pharmacy has come forth with sufficient evidence to create genuine
dispute of material fact. Tech Pharmacy and GLC executed the 2009 NDA on November 9, 2009
(Dkt. #246, Exhibit 5 at p. 1). Tech Pharmacy presents evidence suggesting that on September 3,
2009, Defendants gathered Tech Pharmacy’s information intending to use it without Tech
Pharmacy. See, e.g., Dkt. #246, Exhibit 13 at 124:23, 125:15–21 (“Q. So even if GLC ultimately
decided to go forward in its buildings with a provider other than Tech Pharmacy, GLC still
thought that it would be able to use elements of the pilots that it learned from its pilot with Tech
Pharmacy in that situation, even if it went forward with another provider? A. That’s correct. “).
As such, material fact disputes remain regarding whether Defendants made representations to
induce Tech Pharmacy to enter into the 2009 NDA and whether those representations were false.
Because disputed issues of fact remain, Defendants are not entitled to summary judgment on
Tech Pharmacy’s fraud claim against them.
Fraud Against Fillmore Defendants
Defendants express that Tech Pharmacy cannot maintain fraud, misappropriation of trade
secrets, and breach of contract claims against the Fillmore Defendants. Defendants argue Tech
Pharmacy has offered no evidence that any of the Fillmore Defendants (or anyone operating on
their behalf) made a misrepresentation or omission upon which Tech Pharmacy relied.
Defendants state Tech Pharmacy negotiated only with GLC when entering into the 2009 NDA,
and GLC was the entity that executed the agreement with Tech Pharmacy.
Defendants were merely investors.
Defendants point out that GLC and Drumm Corp.
(“Drumm”) were entities that first became interested in remote packing and dispensing
technology. Ron Silva represented Drumm at the very beginning of the relationship between
GLC and Tech Pharmacy, and he worked on behalf of GLC in his capacity as Board Director of
Tech Pharmacy responds that through Ron Silva, the Fillmore Defendants were
intimately involved in negotiations with Tech Pharmacy and in the formation of Alixa.
Specifically, Tech Pharmacy states Mr. Silva directed Defendants to pursue remote packaging
technology and approved the pilot program with Tech Pharmacy.
Thus, Tech Pharmacy
contends the Fillmore Defendants are liable for fraud.
Based on the evidence put forth by Tech Pharmacy, the Court cannot determine what
entity Ron Silva represented when he engaged with Tech Pharmacy. It is undisputed that Tech
Pharmacy negotiated and entered into the 2009 NDA with GLC. GLC is organized under
Drumm. Fillmore Strategic Investors, LLC (“FSI”) owns one hundred percent of Drumm’s
stock. Fillmore Strategic Management, LLC (“FSM”) is the managing member of FSI and a
wholly-owned subsidiary of Fillmore Capital Partners, LLC (“FCP”) (Dkt. #246, Exhibit 2 at
30:24–25). All of the Fillmore Defendants (FSI, FSM, and FCP) are operated as one entity
named FCP or Fillmore, and Ron Silva is FCP’s sole owner and CEO (Dkt. #246, Exhibit 2 at
24:22–25:3; Dkt. #246, Exhibit 3 at 27:21–28:7). Ron Silva was both Board Director for Drumm
and CEO of FCP leading up to the 2009 NDA (Dkt. #246, Exhibit 2 at 24:22–25:4, 39:13–17).
Defendants argue Ron Silva represented only Drumm and worked on behalf of GLC.
However, the disputed evidence implies otherwise. Tech Pharmacy maintains it understood Ron
Silva represented FCP because he handed out FCP business cards, he communicated with Tech
Pharmacy using an FCP email address, and he was introduced to Tech Pharmacy as the CEO of
FCP (Dkt. #246 at p. 8 (citing Dkt. #246, Exhibit 25 at 21:9–17; Dkt. #246, Exhibit 2 at 52:2–6;
Dkt. #246, Exhibit 28 at GLC-0020707)). In addition, Ron Silva acknowledged the difficulty in
separating his role with FCP and his role with Drumm as Board Director (Dkt. #246, Exhibit 2 at
39:11–17). Tech Pharmacy has presented evidence that shows Ron Silva attended meetings with
Tech Pharmacy’s executive team, observed demonstrations of Tech Pharmacy’s remote
packaging and dispensing technology, and spoke with Tech Pharmacy’s then CEO, Dave Barr
(Dkt. #246, Exhibit 8 at 24:6–25:21). Thus, the Court finds genuine issues of material fact
regarding which entity Ron Silva represented in discussions with Tech Pharmacy leading up to
the 2009 NDA: either he represented GLC/Drumm as Board Director for Drumm or he
represented FCP as CEO. The Court further finds that if Ron Silva represented FCP, then there
is a genuine issue of material fact regarding whether he made representations to Tech Pharmacy
to induce it to enter into the 2009 NDA. Accordingly, Defendants are not entitled to summary
judgment with regard to Tech Pharmacy’s fraud claim against FCP.
With regard to the other Fillmore Defendants, Tech Pharmacy argues FSI and FSM are
liable as alter egos of FCP. Tech Pharmacy points to summary judgment evidence that shows
little distinction between FSI, FSM, and FCP. Ron Silva admitted:
[W]e run everybody as Fillmore. We don’t make those distinctions [between FSI
and FSM] that you’re making . . . . Everyone wears an FCP jacket. FCP is what
we’re known as . . . . I don’t make those distinctions, and I urge people not make
those distinctions. It just causes confusion. We’re ultimately responsible for
everything that everyone does.
(Dkt. #246, Exhibit 3 at 27:21–28:7). Summary judgment evidence also indicates the following:
(1) FSM is a legal formality rather than a functional entity; (2) FSI has not employees of its own;
and (3) Ron Silva sits on the FSI committee with one other person (Dkt. #246, Exhibit 2 at
30:12–13; Dkt. #246, Exhibit 33 at 21:6–12; Dkt. #246, Exhibit 2 at 40:2–19 (“FSM doesn’t
operate other than a legal box. So there is no board. There is a committee that is made up of
FCP people that review the investments. And the FSI board is really the staff at [Washington
State Investment Board, an entity that partly owns FSI,] in which we, as fiduciaries, recommend,
and they approve, new investment, or material changes to investments such as a sale.”).
FCP, FSI, and FSM are Delaware limited liability companies, and Delaware law governs
liability under an alter ego theory. Alberto v. Diversified Grp., Inc., 55 F.3d 201, 203 (5th Cir.
1995). “[T]o succeed on an alter ego theory of liability, plaintiff must essentially demonstrate
that, in all aspects of the business, the  corporations actually functioned as a single entity and
should be treated as such.” Blair v. Infineon Tech. AG, 720 F. Supp. 2d 462, 469 (D. Del. 2010)
alteration in original) (citing Pearson v. Component Tech. Corp., 247 F.3d 471, 485 (3d Cir.
2001). Some factors a court may consider when being asked to disregard the corporate form
include: ‘“(1) whether the company was adequately capitalized for the undertaking; (2) whether
the company was solvent; (3) whether corporate formalities were observed; (4) whether the
dominant shareholder siphoned company funds; and (5) whether, in general, the company simply
functioned as a facade for the dominant shareholder.’” Sprint Nextel Corp. v. iPCS, Inc., No.
3746, 2008 WL 2737409, at *11 (Del. Ch. July 14, 2008).
The Court does not consider FSI and FSM to be alter egos of FCP. Tech Pharmacy has
not shown a lack of corporate formalities or other equitable factors that might support
disregarding FSI and FSM as separate entities from FCP. The fact that FCP, FSI, and FSM
operate as a single entity is insufficient to show liability under an alter ego theory. As a result,
Tech Pharmacy’s alter ego argument fails.
To survive summary judgment, Tech Pharmacy must present evidence that FSI and FSM
engaged in specific conduct that meets the elements of fraud. The Court does not find that Tech
Pharmacy has met its burden. Without offering evidence of direct participation by FSI and FSM,
Tech Pharmacy relies on the acts and representations of Ron Silva to support its fraud claim.
Ron Silva’s relationship with FSI and FSM alone does not establish that he acted on behalf of
these entities leading up to the 2009 NDA. Thus, the Court grants summary judgment with
regard to Tech Pharmacy’s fraud claims against FSI and FSM.
Misappropriation of Trade Secrets & Breach of Contract Against Fillmore Defendants
Defendants argue the Fillmore Defendants did not acquire or disclose Tech Pharmacy’s
trade secrets or other confidential information and breach the 2009 NDA.
The elements of a claim for misappropriation of trade secrets under Texas law are “(1) a
trade secret existed, (2) the trade secret was acquired through a breach of a confidential
relationship or discovered by improper means, and (3) the defendant used the trade secret
without authorization from the plaintiff.” CQ, Inc. v. TXU Mining Co., 565 F.3d 268, 273 (5th
Cir. 2009). A trade secret is “any formula, pattern, device or compilation of information which
is used in one’s business and presents an opportunity to obtain an advantage over competitors
who do not know or use it.” Comput. Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.
As established above, there is a fact issue regarding whether Ron Silva represented FCP
or whether he represented GLC/Drumm. Assuming Ron Silva was a representative for FCP, the
evidence put forth by Tech Pharmacy indicates that Ron Silva had access to Tech Pharmacy’s
confidential information (Dkt. #246, Exhibit 8 at 24:13–15, 107:3–21, 172:9–19). The 2009
NDA binds GLC and its affiliates, which the NDA defines as follows:
As used herein, “Affiliate” shall mean, as to any individual, partnership, joint
venture, corporation, limited liability company, trust, estate or other entity or
organization (a “Person”), any Person controlled by, controlling, or under
common control with such Person . . . . For the purpose of this definition,
“control” (including the terms “controlling”, “controlled by” and “under common
control with”) of a Person means the possession, directly or indirectly, alone or in
concert with others, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
securities, by contract, or otherwise.
(Dkt. #246, Exhibit 5 at p. 1). The Court determines that Ron Silva’s position with Drumm and
FCP makes him an “Affiliate” under the NDA. Accordingly, the Court finds genuine issues of
material fact concerning whether Ron Silva used Tech Pharmacy’s trade secrets to start Alixa
and benefit FCP, which would breach the 2009 NDA. Thus, the Court denies Defendants’
motion for summary judgment on these arguments against FCP.
For FSI and FSM, Tech Pharmacy has not shown any evidence that these entities
acquired Tech Pharmacy’s confidential information or used such information in breach of the
2009 NDA. Tech Pharmacy relies the actions of Ron Silva to support its claims against FSI and
FSM. Again, Ron Silva’s relationship with FSI and FSM alone does not establish that he acted
on behalf of these entities. Thus, the Court grants summary judgment in with regard to Tech
Pharmacy’s misappropriation of trade secrets and breach of contract claims against FSI and
Lastly, Defendants argue equitable estoppel claims are not cognizable under Texas law.
The Court disagrees. Equitable estoppel in the limitations setting is sometimes called fraudulent
Texas recognizes the doctrine of equitable estoppel as a way to prevent a
defendant from asserting statute of limitations as a defense.
Equitable estoppel generally
consists of five elements: (1) a false representation or concealment of material fact (2) made with
knowledge or the means of knowledge of the true facts (3) to a party without knowledge or the
means of knowledge of the true facts (4) the representation was made with the intention that it
would be acted on; and (5) the party to whom the representation was made relied on it to his or
her prejudice. Hill v. Bartlette, 181 S.W.3d 541, 545 (Tex. App.—Texarkana 2005, no pet.).
Further, the Court addressed this issue in its August 15, 2016 Memorandum Opinion and Order.
The Court stated: “To the extent that Plaintiff’s equitable estoppel claim should be considered an
independent cause of action, the Court determines it may be considered an affirmative defense to
limitations and need not be dismissed or re-pleaded.” (Dkt. #70 at p. 4). Therefore, the Court
denies Defendants’ motion for summary judgment on this argument.
It is therefore ORDERED that Defendants’ Motion for Partial Summary Judgment as to
Plaintiff’s Fraud Claims, Equitable Estoppel Claims, and All Remaining Claims Against the
Fillmore Entities (Dkt. #221) is GRANTED IN PART and DENIED IN PART.
It is further ORDERED that Tech Pharmacy Services, LLC’s fraud, misappropriation of
trade secrets, and breach of contract claims against Defendants Fillmore Strategic Investors, LLC
and Fillmore Strategic Management, LLC are DISMISSED.
It is further ORDERED that Defendants’ motion is DENIED in all other respects.
SIGNED this 25th day of July, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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