Diskriter, Inc. v. Alecto Healthcare Services Ohio Valley LLC et al

Filing 21

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S 4 REQUEST FOR PRELIMINARY INJUNCTION. Signed by Senior Judge Frederick P. Stamp, Jr. on 1/25/18. (lmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
DISKRITER, INC.,
a Pennsylvania corporation,
Plaintiff,
v.

Civil Action No. 5:17CV170
(STAMP)

ALECTO HEALTHCARE SERVICES
OHIO VALLEY LLC,
a Delaware limited
liability company,
ALECTO HEALTHCARE SERVICES
WHEELING LLC,
a Delaware limited
liability company and
ALECTO HEALTHCARE SERVICES
MARTINS FERRY LLC,
a Delaware limited
liability company,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFF’S REQUEST FOR PRELIMINARY INJUNCTION
I.

Procedural History

This civil action arises out of a verified request and
complaint for injunction.

ECF 1-2 at 7.

Pursuant to 28 U.S.C.

§ 1441 and § 1446, defendants Alecto Healthcare Services Ohio
Valley LLC, Alecto Healthcare Services Wheeling LLC, and Alecto
Healthcare

Services

Martins

Ferry

LLC

(“defendants,”

and

collectively, “Alecto”), removed this action from the Circuit Court
of Ohio County, West Virginia to the United States District Court
for the Northern District of West Virginia.
Defendants

then

filed

a

motion

to

ECF No. 1.
dismiss

or,

in

the

alternative, to compel arbitration and stay this civil action

pending arbitration.

ECF No. 2.

Plaintiff filed a response in

opposition to defendants’ motion and, pursuant to Rule 65(a) of the
Federal Rules of Civil Procedure and Local Rule of Civil Procedure
78.01, requested a hearing on plaintiff’s motion for a preliminary
injunction and in opposition to defendants’ motion to dismiss. ECF
No. 4.

Defendants filed a reply in opposition to plaintiff’s

request for preliminary injunction.

ECF No. 11.

Pursuant this Court’s order (ECF No. 12), a hearing was held
on the plaintiff’s motion requesting a preliminary injunction on
January 4, 2018. At the hearing, the parties acknowledged that the
dispute over the contract arising out of the Medical Transcription
Services Agreement (“the Agreement”) is subject to arbitration and
that the arbitration has already been initiated.

During the

hearing on the motion for preliminary injunction, the parties
elicited

witness

testimony,

exhibits into evidence.

and

this

Court

admitted

certain

The parties then represented that they

would both request a copy of the hearing transcript and stated that
setting a deadline to submit a supplemental memorandum regarding
the plaintiff’s motion for preliminary injunction one week after
receipt of the transcript was agreeable.
Further, as indicated at the conclusion of the hearing,
defendants’

motion

to

dismiss

(ECF

defendants’

motion

to

compel

arbitration

arbitration

was

granted.

Per

this

No.

2)

was

and

Court’s

denied

stay

and

pending

previous

order

confirming the pronounced order of the Court during the hearing

2

(ECF

No.

15),

this

civil

action

has

been

stayed

pending

arbitration, with the exception of the Court’s consideration of,
and ruling upon plaintiff’s motion for preliminary injunction. The
parties were then each directed to file a supplemental memorandum
as to plaintiff’s motion for preliminary injunction.
Defendants

filed

a

supplemental

brief

in

ECF No. 15.

opposition

to

plaintiff’s request for preliminary injunction (ECF No. 18) and
plaintiff filed a supplemental memorandum of law in support of
request for preliminary injunction (ECF No. 19).
The plaintiff’s motion for preliminary injunctive relief is
now

fully

briefed,

has

been

argued

by

the

parties

at

the

evidentiary hearing, and is ripe for decision. For the reasons set
forth below, this Court finds that Diskriter has failed to make a
‘clear showing’ that it is entitled to such relief under the four
factor test and that Diskriter’s motion for preliminary injunctive
relief should be denied.
II.

Background

Plaintiff Diskriter filed this action in the Circuit Court of
Ohio

County,

West

Virginia,

requesting

the

court

enter

a

preliminary injunction and then permanent injunction enjoining the
defendants Alecto Healthcare Services Ohio Valley LLC, Alecto
Healthcare Services Wheeling LLC and Alecto Healthcare Services
Martins Ferry LLC from utilizing the transcription services of any
other person or entity during the term of the Agreement.
1-2 at 9.

3

ECF No.

Defendants removed this action to the United States District
Court for the Northern District of West Virginia.
Defendants

then

filed

a

motion

to

ECF No. 1.

dismiss

plaintiff’s

complaint or, in the alternative, to compel arbitration and stay
pending arbitration.

ECF No. 2.

The defendants assert the Court

must dismiss plaintiff’s complaint, contending that all issues
contained in the complaint are arbitrable under the Agreement.
Alternatively,

the

defendants

assert

the

Court

should

compel

plaintiff to submit this matter to arbitration and stay the
proceeding pending arbitration.
Plaintiff Diskriter filed a response (ECF No. 4) to the
defendants’ motion to dismiss or, in the alternative, to compel
arbitration and stay pending arbitration, and requested a hearing
on the motion for a preliminary injunction. Plaintiff clarifies in
its response, “[b]y the express terms of the Complaint, Plaintiff
advises that the merits of its claim for breach of contract are to
be resolved at arbitration” and that “[t]he present action involves
one issue, the request for this Court to issue first a preliminary
injunction followed by a permanent one while the arbitration
process is pending.”

ECF No. 4 at 2.

Plaintiff seeks an

injunction pursuant to Federal Rule of Civil Procedure Rule 65 “to
protect

the

irreparable

status
harm,

quo

and

primarily

avoid
related

plaintiff
to

the

from

incurring

termination

of

twenty-seven (27) full-time employees and loss of revenue and
capital investment in the performance of the Agreement, while the

4

arbitration process is pending.”

ECF No. 4 at 3.

Plaintiff

asserts, “[t]he Complaint seeks not a resolution by this Court as
to whether Defendants violated the Agreement or owe any damages,
but

an

injunction

requiring

Defendants

to

perform

under

the

Agreement until the substantive breach and damages can be addressed
by the parties in Arbitration” and is only asking “that this Court
protect the status quo during the arbitration process.”

ECF No. 4

at 3.
Defendants filed a reply in opposition (ECF No. 11) to
plaintiff’s request for preliminary injunction hearing and assert
that plaintiff is not entitled to the extraordinary relief it seeks
because plaintiff is unable to prove that it is likely to succeed
on the merits, prove irreparable harm, prove that the balance of
equities tips in its favor, and unable to prove that a preliminary
injunction is in the public interest.

Defendants assert that the

Court should deny plaintiff’s request for preliminary injunction
and

permit

the

submission

of

this

matter

to

the

American

Arbitration Association, as required by the contractually binding
Medical Transcription Services Agreement.
This Court held an evidentiary hearing on the plaintiff’s
motion for a preliminary injunction.

At the hearing, plaintiff

presented the testimony of one witness: Laveena Yadav, the Chief
Executive Officer (“CEO”) of Diskriter, Inc.

Plaintiff introduced

three exhibits: the Medical Transcription Agreement (“Agreement”);
the Consent to Assignment of Contract; and a letter dated September

5

20, 2017, from Diskriter’s counsel to defendants demanding an
accounting

from

Ohio

Valley

Health

Services

&

Education.

Plaintiff’s CEO testified that the company had not “terminated”
service, but had “suspended” service on two separate occasions.
Diskriter claims that because defendants owed monies to the company
for past invoices, there was justification for shutting down
services and holding patient medical records until payment was
made.
Defendants presented the testimony of one witness, former Ohio
Valley Medical Center/East Ohio Regional Hospital Chief Financial
Officer (“CFO”) Lisa Simon, and introduced seven exhibits, which
consisted of e-mail correspondence between representatives of
plaintiff and defendants.

Former CFO Simon testified that she and

Ms. Yadav discussed the need for transcription services, the
possibility of “old school” doctors not switching to the voice
recognition software, and the agreement that Diskriter would be the
sole vendor for transcription services. The parties disagree as to
whether the medical transcription services contemplated by the
Agreement are distinct from voice recognition software that does
not involve an outside typist/transcriptionist, and submit that
issue is subject to arbitration.
At the conclusion of the hearing, the defendants’ motion to
dismiss (ECF No. 2) was denied and defendants’ motion to compel
arbitration and stay pending arbitration was granted.

ECF No. 15.

Thus, this civil action has been stayed pending arbitration, with

6

the exception of the Court’s consideration of, and ruling upon
plaintiff’s request for preliminary injunction.
III.

Applicable Law

The United States Court of Appeals for the Fourth Circuit has
held that “under certain circumstances, a district court has the
discretion to grant one party a preliminary injunction to preserve
the status quo pending the arbitration of the parties’ dispute.”
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756 F.2d
1048, 1052 (4th Cir. 1985) (finding injunctive relief prior to
staying a case for arbitration appropriate where denial of such
relief would deprive the opposing party of relief, rendering the
arbitration a ‘hollow formality’).

A district court has the

authority to grant injunctive relief in an arbitrable dispute,
provided that the traditional prerequisites for such relief are
satisfied.

Ortho Pharm. Corp. v. Amgen, Inc., 882 F.2d 806, 812

(3d Cir. 1989).
The standard for granting injunctive relief in this circuit is
set forth in International Refugee Assistance Project v. Trump, 857
F.3d 554 (4th Cir. 2017), cert. granted, 137 S. Ct. 2081 (2017).
“A preliminary injunction is an ‘extraordinary remedy,’ which may
be awarded only upon a ‘clear showing’ that a plaintiff is entitled
to such relief.”

Int’l Refugee Assistance Project, 857 F.3d at

607-08 (citing Real Truth About Obama, Inc. v. Federal Election
Commission, 575 F.3d 342 (4th Cir. 2009) (citing Winter v. Natural
Resources Defense Counsel, Inc., 555 U.S. 7 (2008))).

7

Under the

Fourth Circuit standard of review, “[a] preliminary injunction must
be supported by four elements: (1) a likelihood of success on the
merits; (2) that the plaintiff likely will suffer irreparable harm
in the absence of preliminary relief; (3) that the balance of
equities tips in the plaintiff’s favor, and (4) that a preliminary
injunction is in the public interest.”

Id. at 608 (citing Real

Truth, 575 F.3d at 346).
IV.

Discussion

Following a review of the parties’ briefs, an evidentiary
hearing in this matter, and pursuant to an analysis under the four
International Refugee / Real Truth factors for preliminary relief,
this Court finds that plaintiff has failed to meet its burden of
proof to obtain the extraordinary remedy of preliminary injunctive
relief in that the four elements required for such relief have not
been clearly established based on the record in this case.1

1

This Court’s decision is based solely upon the record
established in this civil action and the testimony and exhibits
introduced to date into evidence at the hearing on plaintiff’s
motion for a preliminary injunction. Defendants submitted
affidavits prior to the hearing, attached as exhibits to
defendants’ reply in opposition, consisting of the “Declaration of
Rick Scherich” and the “Declaration of Carol Talkington” (ECF Nos.
11-1, 11-2). While defendants may be correct in arguing that there
may be occasions where the Court is permitted to consider hearsay
evidence at this time for the purposes of ruling on the plaintiff’s
request for preliminary injunctive relief under Univ. of Tex. v.
Camenisch, 451 U.S. 390 (1981) and League of Women Voters of N.C.
v. North Carolina, 769 F.3d 224 (4th Cir. 2014) (ECF No. 18 at 5
n.2), this Court notes that its decision is based solely upon the
record established and the exhibits admitted at the hearing and
testimony of witnesses at the hearing, and that it is not necessary
to consider the defendants’ affidavits for purposes of this
decision.
8

This Court notes that this civil action has already been
submitted to arbitration,2 with the exception of this Court’s
consideration

of,

and

preliminary injunction.

ruling

upon

ECF No. 15.

plaintiff’s

motion

for

In its analysis of the four

factors set out above, this Court must consider the merits of
plaintiff’s claim in order to determine, among other things,
plaintiff’s likelihood of success.

This Court cannot, and will

not, rule on claims which the parties have agreed are subject to
arbitration under the binding agreement.

However, this Court must

consider the merits of Diskriter’s argument in order to analyze the
factors under the test set forth in International Refugee / Real
Truth.

The four factors are discussed, in turn, below.

Looking at the first of the four factors, this Court finds
that the plaintiff has not clearly shown that it is likely to
succeed on the merits.

The evidence presented at the hearing is

insufficient for this Court to find that Diskriter has satisfied
the first factor of the test set out above. Plaintiff asserts that
“Diskriter will succeed on the merits as plaintiff [sic]3 has

2

This decision, and the Court’s analysis under the
International Refugee / Real Truth test, is in no way intended to,
and should not, influence or affect the decision of the arbitrator.
The arbitrator, of course, will make his or her decision based upon
all of the evidence presented to the arbitrator which might
include, in part, evidence which was presented as part of the
preliminary injunction hearing.
3

The Court has construed plaintiff’s argument to be “Diskriter
will succeed on the merits as [defendant] has admitted to breaching
the Agreement by utilizing another vendor in addition to M*Modal to
handle transcription services.”
9

admitted to breaching the Agreement by utilizing another vendor in
addition to M*Modal to handle transcription services.”
at 3.

ECF No. 19

However, plaintiff’s CEO testified that the company had not

“terminated” service, but had merely “suspended” service on two
separate occasions because defendants owed monies to the plaintiff
for past invoices.

The evidentiary record before this Court is

unclear as to whether plaintiff had a right to shut down services
provided to the defendants under the agreement without proper
notice

or

opportunity

to

cure

prior

to

suspending

services.

Paragraph 18 of the Medical Transcription Services Agreement (ECF
No. 14-1), introduced at the hearing and admitted as Plaintiff’s
Exhibit No. 1, states, in pertinent part, as follows:
18. Termination. This Agreement may be terminated only
by written notice as provided for in this Section, for
the following reasons:
a.
Cancelable by either party for a breach
of this Agreement by the other party hereto,
upon thirty (30) days’ written notice,
specifically
stating
the
cause
of
cancellation.
If the non-canceling party
shall cure the breach within thirty (30) days
of receiving such notice, said cancellation
shall be null and void.
If breach is not
cured within that thirty (30) day period, the
cancellation shall be effective at the end
thereof without any subsequent notice being
required.
ECF No. 14-1 at 5.
At the hearing, upon inquiry by defense counsel, plaintiff’s
witness, Diskriter’s CEO, stated, “We were not terminating the
contract.

We just suspended the service.”

ECF No. 16 at 42.

In

response to the question, “Is there anywhere in the contract that
10

allows you to terminate services without any warning to the
hospital?,”

Diskriter’s

terminate the service.

witness

asserted,

“No.

We just suspended them.”

We

did

not

Id.

Defendants assert that “[f]ollowing Plaintiff’s August 25,
2017,

breach

transcription

of

the

services,

Agreement

and

Defendants

improper

contacted

cessation
an

of

alternative

transcription vendor, iMedX, to provide transcription services as
might be required based on Plaintiff’s conduct in order to ensure
that patient care continued without interruption.”

ECF No. 11 at

4. These competing allegations are viable arguments to be advanced
during the arbitration proceedings.

Further, the parties disagree

whether the medical transcription services contemplated by the
Agreement are distinct from voice recognition software that does
not involve an outside transcriptionist.

These issues raise doubt

as to whether plaintiff is likely to succeed on the merits of its
claim against the defendants. Thus, this Court finds Diskriter has
not clearly shown that it is likely to succeed on the merits, and
has failed to meet the first factor of the test.
Second, this Court finds that the Diskriter has failed to show
that it is likely to suffer irreparable harm in the absence of
preliminary relief.

The plaintiff must show “that injury is

certain, great, actual and not theoretical.”

Harper v. Blagg, No.

2:13CV19796, 2014 WL 3750023, at *2 (S.D. W. Va. May 21, 2014)
(quoting Tanner v. Fed. Bureau of Prisons, 433 F. Supp. 2d 117, 125
(D.D.C.

2006)).

Here,

there

is

11

insufficient

documentary

or

testimonial evidence to support a claim of irreparable harm.
Diskriter’s request for a hearing on its requests for a preliminary
injunction asserts “defendants were in breach of the Medical
Transcription Services Agreement [] between Diskriter and the
Defendants [], and such breach [is] causing irreparable harm to
Diskriter while Diskriter was attempting to assert its contractual
rights through arbitration.”

ECF No. 19 at 1.

This Court finds, however, that such a showing has not been
made.

The alleged harm that plaintiff claims to be suffering is

the termination of five transcriptionists from the company, the
possible termination of up to 27 transcriptionists as a result of
decreased work, and potential harm to Diskriter’s professional
reputation.
possible

This Court finds that, at this point, the evidence of

damage

to

plaintiff’s

reputation

is

speculative

and

insufficient to clearly show irreparable harm. Further, this Court
finds that the possible termination of up to 27 transcriptionists
as a result of decreased work is also speculative and has not been
clearly shown based upon the evidence submitted at the hearing.
Diskriter’s CEO testified at the hearing that five employees have
been terminated at this time, but was unable to say when and if
other

employees

would

be

terminated.

Further,

no

financial

documentation was presented to the Court as evidence of Diskriter’s
financial status, nor was there sufficient evidence to reflect the
amount of work these transcriptionists were doing prior to the
alleged breach in September 2017 to clearly prove any effect

12

defendant’s alleged actions may have had.

Diskriter asserts that

it “is facing the prospect of eliminating a significant number of
jobs if the status quo is not maintained, and if no preliminary
injunction is issued, Diskriter is then facing unknown additional
training costs when it has to hire new employees in the future once
it prevails in arbitration.”

ECF No. 19 at 4.

However, issuing a

preliminary injunction based only on a possibility of irreparable
harm is inconsistent with the characterization of injunctive relief
as an extraordinary remedy that may only be awarded upon a clear
showing that the plaintiff is entitled to such relief.

See Winter

v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22, 129 S. Ct. 365,
375–76, 172 L. Ed. 2d 249 (2008) (citing Mazurek v. Armstrong, 520
U.S. 968, 972, 117 S. Ct. 1865, 138 L.Ed.2d 162 (1997) (per
curiam)). Diskriter has failed to make a clear showing that it is
likely to suffer irreparable harm in the absence of preliminary
relief, and has failed to satisfy the second factor of the test.
Third, this Court finds that the Diskriter has failed to show
that the balance of equities tips in its favor. Plaintiff advances
arguments concerning money damages, the termination of employees,
concern in maintaining the status quo, the volume of transcription
services provided by defendants being reduced “from 150 to 300 jobs
per day to now 1 to 5 jobs per day” (ECF No. 19 at 3), and damage
to its professional reputation.

Defendants, on the other hand,

advance arguments regarding the need for consistent and efficient
medical recordkeeping, the effects of technological advancement in

13

the medical transcription industry, and argument related to justify
the hiring of iMedX as a back-up company for standard transcription
services due to the abrupt stoppage of services on two separate
occasions and the need to ensure continued hospital functions and
patient care.

ECF No. 18 at 5.

This Court finds that Diskriter

has failed to make a clear showing based upon the present record
that the balance of equities tips in its favor, and has failed to
satisfy the third factor under the test.
Finally, this Court finds that Diskriter has failed to show
that a preliminary injunction is in the public interest. Diskriter
asserts that Alecto has “blatantly used it[s] corporate power to
breach a contract and place a smaller company at the whim of the
defendants” and “should be required by a preliminary injunction to
maintain the status quo and use Diskriter’s services while the
arbitration process plays out.”

ECF No. 19 at 4.

Alecto argues

that “it cannot be in the public interest to allow a company prone
to

abruptly

stopping

vital

hospital

services

and

effectively

holding medical records hostage for payment to be permitted to
maintain that status quo” and that defendants “must maintain smooth
operations” and “comply with federal regulations and seek incentive
programs to reduce healthcare costs overall.”

ECF No. 18 at 9.

Considering the balancing of equities, Diskriter has failed to make
a clear showing that granting preliminary injunctive relief to
maintain “the status quo for the arbitration process to play out”

14

(ECF No. 19 at 5) is in the public interest, and has failed to
satisfy the fourth factor under the test.
Diskriter has not produced sufficient evidence that could lead
this Court to conclude that this is an extraordinary circumstance
requiring the extraordinary remedy of preliminary relief.

The

factors above have not been satisfied and Diskriter has failed to
make a ‘clear showing’ that it is entitled to such relief.

The

Court therefore finds that Diskriter’s motion for preliminary
injunctive relief should be denied.
V.

Conclusion

For the reasons stated above, the plaintiff’s motion for a
preliminary injunction (ECF No. 4) is DENIED.
IT IS SO ORDERED.
The Clerk is directed to transmit a copy of this order to
counsel of record herein.
DATED:

January 25, 2018

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

15