A complaint was removed from Los Angeles County Superior Court to federal court on Thursday against healthcare giant Carbon Health Technologies, Inc by Mend Health, Inc. The plaintiffs argued that the defendants lured them into “disclosing all of its confidential and proprietary information under the guise of an acquisition.”
Mend alleged that Carbon breached a contract, misappropriated of trade secrets, fraud, negligent misrepresentation, breach of implied contract of good faith and fair dealings, and a violation of the California Business and Professions Code.
Mend said they operate an urgent care center with three locations in California. The company aims to “provide high quality medical services to patients and prides itself on being the neighborhood’s walk-in medical clinic.” Carbon is a much larger company; in 2020, they announced their intent to expand their clinic count to 1,500 nationwide with the assistance of $100 million in venture capital funding, according to the filing. Prior to this announcement they had no clinics in the area where Mend operates, the complaint said.
The defendants sought out Mend about a potential acquisition opportunity, to which Mend responded by “providing the blueprint for operating an effective and profitable urgent care facility in its market,” the complaint said. The defendants allegedly signed a non-disclosure agreement (NDA) and expressed to Mend on separate occasions that they had no intention of opening a competing clinic in the area. If anything, they purportedly said, they would either acquire Mend or move on and not open a competing clinic.
After they sustained negotiations with the plaintiff for an extended period of time and acquired information, they terminated the negotiations and expressed their alternative plans to open a competing venture.
Because an NDA had been signed between the two parties, Mend said they had provided confidential proprietary and financial information to the defendant. The complaint explains that the defendants “admitted that while it was conducting “due diligence” to acquire Mend, it was concurrently negotiating and subsequently signing a lease to open its own clinic less than a half-mile from Mend’s facility.” After acquiring all of Mend’s sensitive information, they were well-positioned to open a clinic that would effectively compete, Mend said.
The complaint charges the defendants with breach of contract, misappropriation of trade secrets, fraud, negligent misrepresentation, breach of implied covenant of good faith and fair dealings, and lastly a violation of Business & Professions Code.