UHSPRO v. Secure Documents
MEMORANDUM DECISION AND ORDER denying the 7 Motion for TRO; and 7 Motion for Preliminary Injunction Signed by Judge Jill N. Parrish on 6/23/17. (ss)
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH
MEMORANDUM DECISION AND
ORDER DENYING PRELIMINARY
SECURE DOCUMENTS, INC., doing business
as MED-R MEDICAL SERVICES,
Case No. 2:17-cv-00411-JNP
Judge Jill N. Parrish
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]. The court
held an evidentiary hearing on the motion on May 25, 2017. 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].
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 nonexclusive 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 nonexclusive 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. 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. 171; 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. 172–74, 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]. 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. 178, 194–95].
13. In January, 2017, 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, 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 TMFlow 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]. 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 secrets,
d. not to compete with UHSpro in the marketplace,
e. not to engage in any business opportunities without UHSpro’s involvement,
f. not to disparage UHSpro in any way,
g. not engage in any activity that would undermine a customer’s confidence in
h. not to engage in any business that is similar to the joint venture between UHSpro
15. The court held an evidentiary hearing on the motion for a preliminary injunction on May
16. Both in the motion and at the hearing, UHSpro relied upon two causes of action to
support its request for a preliminary injunction: breach of contract and misappropriation
of trade secrets.
STANDARD FOR GRANTING INJUNCTIVE RELIEF
To obtain a preliminary injunction, the moving party must establish: “(1) a substantial
likelihood of success on the merits; (2) irreparable harm to the movant if the injunction is denied;
(3) the threatened injury outweighs the harm that the preliminary injunction may cause the
opposing party; and (4) the injunction, if issued, will not adversely affect the public interest.”
Gen. Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222, 1226 (10th Cir. 2007). “[A]
preliminary injunction is an extraordinary and drastic remedy, one that should not be granted
unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong,
520 U.S. 968, 972 (1997) (citation omitted); accord Schrier v. Univ. of Colo., 427 F.3d 1253,
1258 (10th Cir. 2005) (“As a preliminary injunction is an extraordinary remedy, the right to
relief must be clear and unequivocal.” (citation omitted)).
While any preliminary injunction is an extraordinary remedy, the Tenth Circuit has
identified three types of injunctions that are particularly disfavored: “(1) a preliminary injunction
that disturbs the status quo; (2) a preliminary injunction that is mandatory as opposed to
prohibitory; and (3) a preliminary injunction that affords the movant substantially all the relief he
may recover at the conclusion of a full trial on the merits.” O Centro Espirita Beneficiente Uniao
Do Vegetal v. Ashcroft, 389 F.3d 973, 977 (10th Cir. 2004) (en banc) (Murphy, J., concurring in
part and dissenting in part) (citation omitted). These disfavored injunctions “must be more
closely scrutinized to assure that the exigencies of the case support the granting of a remedy that
is extraordinary even in the normal course.” Id. at 975 (per curiam).
As a preliminary matter, the court must determine whether the requested injunction falls
within one of the disfavored categories in order to evaluate UHSpro’s motion for a preliminary
injunction under the proper standard. In particular, the court must decide whether the injunction
sought by UHSpro is mandatory as opposed to prohibitory in nature. An injunction is mandatory
“if the requested relief ‘affirmatively require[s] the nonmovant to act in a particular way, and as
a result . . . place[s] the issuing court in a position where it may have to provide ongoing
supervision to assure the nonmovant is abiding by the injunction.’” Schrier, 427 F.3d at 1261
The Tenth Circuit’s Schrier opinion is particularly relevant to the facts of this case. In
Schrier, the University of Colorado terminated Dr. Schrier’s appointment as the chair of the
university’s department of medicine. Dr. Schrier sued, and sought a preliminary injunction that
would reinstate his chairmanship. Id. at 1256. The Tenth Circuit concluded that the requested
relief did not disturb the status quo because Dr. Schrier merely sought to reinstate “the last
uncontested status between the parties.” Id. at 1260 (citation omitted). But the requested
injunction was nonetheless mandatory because it required the university to affirmatively act to
reinstate Dr. Schrier’s chairmanship and would place the court in a position where it would have
to supervise the forced relationship between litigation adversaries. Id.at 1261.
In this case, a significant portion of the injunctive relief requested by UHSpro is similarly
mandatory in nature. UHSpro asks the court to order Med-R to honor its alleged obligations
under the sales contract to market and promote UHSpro’s monitoring devices and split the
resulting net revenues evenly, to continue the joint business venture, and to provide services to
the joint venture’s clients. [Docket 7, p. 2]. In other words, UHSpro seeks to force its litigation
opponent to continue to participate in a cooperative business venture. Such an injunction would
not be prohibitory in nature. It would force Med-R to affirmatively act on a daily basis to
actively participate in and promote the parties’ former business venture. Moreover, such a forced
marriage between litigation opponents would undoubtedly place this court “in a position where it
may have to provide ongoing supervision to assure the nonmovant is abiding by the injunction.”
Schrier, 427 F.3d at 1261 (citation omitted). The court would be required to determine whether
Med-R had adequately performed its court-ordered duty of providing services to joint clients and
working cooperatively with UHSpro.
UHSpro, therefore, seeks a disfavored mandatory injunction. Thus, the court must closely
scrutinize the exigencies of this case when evaluating the four requirements for issuing a
LIKLIHOOD OF SUCCESS
UHSpro bases it motion for a preliminary injunction upon two of its causes of action:
breach of contract and misappropriation of trade secrets. It argues that it will likely prevail on
both of these claims at trial. The court finds otherwise.
A. Breach of Contract
UHSpro alleges in its complaint that Med-R breached a number of provisions found in
the February 26, 2015 contract. The court concludes that UHSpro likely will not prevail on this
cause of action because the parties abandoned the contract in August 2015.Therefore UHSpro
may not enforce it.1
The contract at issue here contains a Utah choice-of-law provision. Under Utah law, “a
contract is abandoned when one party ‘show[s] by unequivocal acts that he regard[s] the
agreement as abandoned,’ and the other party acquiesces.” Watkins v. Ford, 304 P.3d 841, 849
(Utah 2013) (alterations in original) (citation omitted). Additionally, “a contract may be
abandoned by the parties’ express assent or through ‘acts or conduct of the parties inconsistent
with the continued existence of the contract.’” Id. (citation omitted).
The scope of the contract between the parties was limited to the marketing of biomonitoring screening devices for which UHSpro “owns exclusive and non-exclusive rights in the
Americas and parts of Europe . . . and all other products and Product related thereto (collectively,
the ‘Product’).” The only bio-monitoring screening device that UHSpro held rights to at the time
the parties entered into the contract was the MaxPulse device. Thus, the obligations of the
contract related only to the marketing of the MaxPulse device.
At the evidentiary hearing, UHSpro’s representative testified that the parties abandoned
the MaxPulse device a few months after problems with the device had been discovered in the
spring of 2015. [Tr. 171]. Med-R’s president considered the contract to be nonexistent at that
point, and Med-R expressed its desire to enter into a different, month-to-month agreement with
UHSpro. [Tr. 239-40]. Emails between UHSpro and Med-R in August of 2015 evidence the fact
that the parties had moved on to a new RM-3A device, for which the parties had agreed to a new
month-to-month leasing agreement. [Exs. 105, 106]. UHSpro’s representative stated in one of
these emails that the parties need to “create a new contract” to memorialize the agreement to
market the new RM-3A device. [Ex. 106]. In October 2015, UHSpro prepared a new draft
The court notes that the contract waives the parties’ right to a jury trial. At minimum, therefore,
the court will be the ultimate finder of fact as to the contract claim.
contract proposing new terms for marketing the RM-3A device, but Med-R refused to execute it.
In sum, by mutual agreement both UHSpro and Med-R abandoned all efforts to market
the MaxPulse device by August 2015. The conduct of both parties was “inconsistent with the
continued existence of the contract” to promote and profit from the MaxPulse device Id. (citation
omitted). The parties therefore abandoned the February 26, 2015 contract and Med-R cannot be
held liable for breaching any of its terms.2
B. Trade Secret Infringement
UHSpro also alleged in its complaint that that Med-R misappropriated its trade secrets. In
order to determine whether UHSpro would likely prevail on its trade secret claim, the court must
first examine the threshold question of “whether, in fact, there is a trade secret to be
misappropriated.” USA Power, LLC v. Pacificorp, 235 P.3d 749, 759 (Utah 2010) (hereinafter
USA Power I). In order for a trade secret to exist, the plaintiff must possess information that
“‘derives independent economic value’ ‘from not being generally known to’ or ‘readily
ascertainable by’ those who could ‘obtain economic value from its disclosure or use.’” USA
Power, LLC v. Pacificorp, 372 P.3d 629, 649 (Utah 2016) (hereinafter USA Power II) (quoting
Utah Code § 13–24–2(4)(a)).
UHSpro’s representative testified that the combination of several pieces of information
constituted a protectable trade secret. Specifically, he testified that knowledge about bio-medical
testing devices, a “no risk” model whereby a business could provide both the device and a
technician to doctors at no charge in exchange for a share of the revenue produced by the device,
the proper billing codes to submit to insurance companies and the Government to receive
Some of the terms of the contract temporarily survived the mutual abandonment of the contract.
A noncompete provision explicitly bound the parties for one year after the termination of the
contract. Because Med-R did begin to market another competing medical device until well after
a year had passed from the August 2015 abandonment, it did not breach the noncompete clause.
payment for the testing, and marketing materials for the business scheme, taken together,
constituted a trade secret. [Tr. 19–23].
At the hearing, UHSpro’s representative conceded that no single element of its business
scheme was a trade secret. The court agrees. UHSpro had no secret information about any of the
monitoring devices; it had only the publicly available information publicized by the
manufacturers. Nor is the “no risk” sales model a secret. Med-R’s president credibly testified that
such a model is well known in the medical device industry. The billing codes are not secret;
insurance companies and government agencies publish them and provide explanations on their
proper use. Finally, marketing materials are by definition not secret. The entire purpose of such
materials is to publicize information.
UHSpro, therefore, hangs its hat upon its theory that the combination of various elements
of publicly available information was itself a cognizable trade secret. “[A] compilation of
information within the public domain may constitute a trade secret.” USA Power I, 235 P.3d at
760. In order to determine whether such a compilation trade secret exists, the factfinder may
consider a number of factors, including:
(1) the extent to which the information is known outside of the business; (2) the
extent to which it is known by employees and others involved in its business; (3)
the extent of measures taken by the business to guard the secrecy of its
information; (4) the value of the information to the business and its competitors;
(5) the amount of effort or money expended by the business in developing the
information; (6) the ease or difficulty with which the information could be
properly acquired or duplicated by others.
Id. (quoting RESTATEMENT OF TORTS § 757 cmt. b (1939)).
It is unlikely that UHSpro’s compilation theory will carry the day at trial. First, UHSpro
and Med-R necessarily had to reveal this allegedly secret business model to potential customers
in order to market it to doctors and medical clinics. In order to sign up doctors to participate in
their business model, UHSpro or Med-R had to pitch it to them first. Thus, they had to reveal the
allegedly secret compilation of the use of a monitoring device on a “no risk” basis while
employing certain billing codes to obtain an optimal amount of revenue per patient. After
receiving this compilation of information, the doctor was under no obligation to agree to
participate in UHSpro’s business scheme or to sign any contracts that may require the doctor to
keep the business model a secret. UHSpro’s claimed compilation trade secret is not like a secret
manufacturing technique or formula that is capable of utilization without revealing it to the
public. In short, UHSpro was required to expose its business model to the public in order to
profit from it.
Moreover, upon examining the factors laid out in USA Power I for determining whether a
compilation trade secret exists, the court determines that UHSpro likely cannot prove the
existence of a trade secret. In particular, the court determines that the component parts of the
alleged compilation trade secret are widely known outside of UHSpro, the compilation is known
by a great number of employees at UHSpro and Med-R, who must market it, and it would be
relatively easy for competitors to properly acquire or duplicate UHSpro’s business model.3
Because UHSpro likely will not prevail on either its breach of contract claim or its trade
secret claim, it has not satisfied its burden to prove a substantial likelihood of success on the
In Addition, Med-R’s representative credibly testified that it was Med-R, not UHSpro that
brought the idea of the no-risk model to the partnership. Thus, one of the essential elements of
the alleged compilation trade secret was not something that UHSpro could rightfully claim.
merits required for a standard preliminary injunction, much less the more exacting standard
required for the disfavored injunction it seeks.
UHSpro likewise has failed to how that any compensable harm it may suffer is
irreparable. “A plaintiff satisfies the irreparable harm requirement by showing ‘a significant risk
that he or she will experience harm that cannot be compensated after the fact by monetary
damages.’” Crowe & Dunlevy, P.C. v. Stidham, 640 F.3d 1140, 1157 (10th Cir. 2011). An
economic loss suffered by a business entity “usually does not, in and of itself, constitute
irreparable harm.” Port City Properties v. Union Pac. R. Co., 518 F.3d 1186, 1190 (10th Cir.
UHSpro argues that its goodwill with its clients will be damaged absent an injunction and
that this lost goodwill is irreparable because it may be difficult to calculate. See Sw. Stainless, LP
v. Sappington, 582 F.3d 1176, 1192 (10th Cir. 2009) (“It is the value of this goodwill that the
Noncompetition Agreements were designed to protect, and the incalculable damage to that
goodwill can constitute irreparable harm.”). Setting aside the question of whether any loss of
UHSpro’s goodwill would be so difficult to measure as to constitute irreparable harm, the court
determines that any loss of UHSpro’s goodwill would be minimal at best in this case.
At the evidentiary hearing, Med-R’s president presented credible evidence that Med-R
was the point of contact with the clients. In fact, UHSpro sought a joint venture with Med-R
precisely because of its extensive contacts with doctors and medical practices. In the joint
business venture between the two companies, UHSpro supplied the medical devices while MedR marketed them to doctors and provided the technicians and services to maintain a good
relationship with the clients. Moreover, it was Med-R that entered into contracts with doctors
that obligated it to provide devices and services to the clients, not UHSpro. Based upon the
evidence presented at the hearing, the court finds that UHSpro had little or no goodwill or
personal contacts with the end clients to be damaged. Indeed, there was no evidence presented of
the extent to which any of the clients were aware of UHSpro or its dispute with Med-R. Thus any
damages that UHSpro may have suffered because Med-R decided to terminate UHSpro as its
supplier of monitoring devices can be compensated with money damages.4
BALANCE OF HARMS
UHSpro has not proven that the balance of harms weighs in its favor. When considering a
preliminary injunction, “courts ‘must balance the competing claims of injury and must consider
the effect on each party of the granting or withholding of the requested relief.’” Winter v. Nat.
Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). Because of the mandatory nature of the requested
injunction, the harm to Med-R would be significant. Med-R would lose the right to control its
business and would be forced into a business relationship for an extended period of time with its
litigation rival. This would harm Med-R’s business and prevent it from expanding or exploring
other opportunities as well as potentially harming its relationship or contracts with its new
supplier of monitoring devices. Even more significant, however, is that the requested injunction
would force Med-R to continue an unprofitable business venture that could pose a risk to its own
On the other side of the scale, UHSpro alleges that it will suffer substantial harm absent
an injunction. But as noted above, any unjust harm suffered by UHSpro is compensable through
monetary damages. Absent a valid claim of irreparable harm, UHSpro’s harm is outweighed by
the harm Med-R would suffer if this court were to enter the requested injunctive relief. See Fish
UHSpro only mentions in passing its trade secret claim when it argues that it would be
irreparably harmed absent an injunction. [Docket 7, p. 34]. Notably, UHSpro has not argued that
it would be irreparably harmed absent an injunction because its alleged trade secrets would be
destroyed through disclosure. The court, therefore, has no occasion to consider such an
argument. Moreover, any unjust enrichment derived from Med-R’s alleged improper use of
UHSpro’s trade secrets is compensable through money damages.
v. Kobach, 840 F.3d 710, 754 (10th Cir. 2016) (“We must next balance the irreparable harms we
have identified against the harm to defendants if the preliminary injunction is granted.”
(emphasis added) (citation omitted)).
The court must also consider any adverse effects of granting an injunction upon the
public at large. Winter, 555 U.S. at 24 (“In exercising their sound discretion, courts of equity
should pay particular regard for the public consequences in employing the extraordinary remedy
of injunction.” (citation omitted)). In this case, the public effects of the requested injunction
appear to be minor or nonexistent. But the absence of an adverse effect on the public does not
justify the mandatory injunctive relief that UHSpro is requesting.
The court finds that UHSpro has failed to meet its burden to establish any of the four
requirements for a preliminary injunction. It likely will not prevail on its contract claim or its
trade secret claim; it has failed to demonstrate that any harm would be irreparable; the balance of
harms weighs against it; and such an injunction would not serve the public interest. Thus,
UHSpro has not established a right to a preliminary injunction, much less satisfied the additional
scrutiny required for the disfavored injunctive relief it seeks. The court, therefore DENIES
UHSpro’s motion for injunctive relief. [Docket 7].
DATED June 23, 2017.
BY THE COURT:
JILL N. PARRISH, Judge
United States District Court
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