Homecare CRM, LLC v. Adam Group, Inc.

952 F. Supp. 2d 1373, 85 Fed. R. Serv. 3d 1505, 2013 WL 3388389, 2013 U.S. Dist. LEXIS 95277
CourtDistrict Court, N.D. Georgia
DecidedJuly 8, 2013
DocketCivil Action No. 1:12-cv-1958-TCB
StatusPublished

This text of 952 F. Supp. 2d 1373 (Homecare CRM, LLC v. Adam Group, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Homecare CRM, LLC v. Adam Group, Inc., 952 F. Supp. 2d 1373, 85 Fed. R. Serv. 3d 1505, 2013 WL 3388389, 2013 U.S. Dist. LEXIS 95277 (N.D. Ga. 2013).

Opinion

ORDER

TIMOTHY C. BATTEN, SR., District Judge.

Before the Court is the motion of Defendant The Adam Group, Inc. of Middle Tennessee (“PlayMaker”) for sanctions against Plaintiff Homecare CRM, LLC [113] pursuant to Federal Rule of Civil Procedure 11.

As an initial matter, the Court notes that PlayMaker’s motion limits its request for sanctions to Homecare. The motion does not seek sanctions against Home-care’s counsel, who did not appear in the case until April 2013, almost a year after this action was filed.

I. Background

Homecare and PlayMaker are competitors, and as this case has shown from the beginning, their dislike and distrust of each other runs deep. Both develop customer-relationship management software and license it to companies in the home care or hospice industry. Homecare and PlayMaker each have a core software product and an add-on program that allows customers to access even more information. Homeeare’s core product is “HomecareCRM,” and its add-on software is called “Harvest.” PlayMaker’s core product is “PlayMaker CRM,” and its add-on software is called “TargetWateh.” The programs, among other things, allow the parties’ respective customers to access and [1376]*1376filter medical claims data in order to find potential clients. The parties’ current clash involves Harvest and TargetWatch.

Homecare developed Harvest in late 2010 and 2011 and marketed the program to its customers in early 2011. In April 2011, PlayMaker announced the availability of TargetWatch, which was available for customers to use the following month; TargetWatch performs functions similar to the functions that Harvest performs. Emails sent from April through June 2011 show that Homecare knew about the launch of TargetWatch and about Play-Maker’s partnership with Health Market Science (“HMS”), a company that sells Medicare claims data, to bring Target-Watch to PlayMaker’s customers.

On June 6, 2012, Homecare filed this action. In its complaint, Homecare avers, among other things, that PlayMaker is wrongfully using its trademarks, has made false advertisements, has violated Georgia’s Uniform Deceptive Trade Practices Act and Tennessee’s Consumer Protection Act, has engaged in unfair competition, and has misappropriated Homecare’s trade secrets. The latter allegation is the reason for the present motion.

Homecare avers that PlayMaker gained unauthorized access to and used Harvest, which is a trade secret, to create its competing product, TargetWatch. PlayMaker contends that not only is this untrue, but that Homecare and its former counsel violated Rule 11 by including the trade-secrets claim in the complaint.

The Court first summarizes Homecare’s trade-secrets claim in the complaint and the factual allegations associated therewith as well as PlayMaker’s arguments against the claim. Next, the Court reviews other disputes that have arisen in this case, as they give important context for this motion. Finally, the Court evaluates whether Homecare violated Rule 11(b) such that sanctions are appropriate under Rule 11(c). Ultimately, the Court finds that Homecare did violate Rule 11(b) when its counsel signed a complaint that included the trade-secrets claim, and that sanctions are necessary.

A. Homecare’s Trade-Secrets Claim

In the second paragraph of its complaint, Homeeare’s opening salvo about PlayMaker’s “wrongful activities” includes the allegation that PlayMaker “misappropriate[ed] significant portions of [Home-care’s] proprietary software solutions, including the manner in which [Homecare’s] software analyzes, compiles, presents and displays data on home health care referral sources, and using that information to design and develop competing software solutions.”

Going into greater detail later in the complaint, Homecare avers that in 2010 it “came up with the idea to acquire raw Medicare and health insurance claims data” and to process that data so that its “health care industry customers [could] better identify and target local business referral sources.” The product resulting from this idea was Harvest. Initially, Harvest offered Homecare’s customers access to Medicare claims information; Homecare later added information from private health insurance companies to Harvest.

Homecare asserts that Harvest, “its underlying coding system, and the manner in which the information compilations are displayed and formatted in the Harvest solution ... are proprietary to [Homecare] and are confidential.”1 It contends that it [1377]*1377has made reasonable efforts “under the circumstances” to maintain the secrecy of Harvest, and consequently it constitutes a trade secret of Homecare.

Homecare avers that PlayMaker misappropriated Harvest. It contends that PlayMaker suspiciously marketed and offered TargetWatch soon after Homecare launched Harvest, and that TargetWatch “analyzes, compiles, formats, and displays information drawn from the claims data in manners that are very similar” to how Harvest operates. Homecare believes that TargetWatch is similar to Harvest because PlayMaker wrongfully obtained Home-care’s proprietary data from HMS and wrongfully accessed Harvest.

With respect to Homecare’s proprietary data with HMS, Homecare claims that it had an agreement with HMS to “format and compile data in a manner and format that was different from [HMS’s] standard claims data set product, and that was proprietary to [Homecare] and to the analysis and compilations and formats and coding” that Homecare used for Harvest. Also, according to Homecare, its agreement with HMS provided that Homecare would “own all non-public data it provided to [HMS] for use in [HMS’s] development, customization or use of technologies and processes to create deliverables for [Homecare], and all results provided by those deliverables.” Homecare contends that PlayMaker knew about this relationship and used HMS to access Homecare’s proprietary data.

With respect to accessing Harvest, Homecare alleges that PlayMaker “improperly and without authorization” obtained access to Harvest either through HMS or a Homecare current or former customer. Homecare avers that PlayMaker used the information it acquired from HMS and through its unauthorized access to Harvest to design, develop and modify its competing product, TargetWatch, and that is why TargetWatch “analyzes, compiles, displays and presents very similar data in a substantially similar manner to” Harvest.

Thus, in the count for its claim for misappropriation of trade secrets, Homecare asserts that Harvest is comprised of trade secrets under Georgia’s and Tennessee’s trade-secrets statutes and that PlayMaker misappropriated Harvest when it

(a) acquired access to [Homecare’s] Harvest Proprietary Data Solution by improper means; and/or (b) used [Homecare’s] Harvest Proprietary Data Solution when it knew or had reason to know that knowledge of the Harvest Proprietary Data Solution was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use, or was devised from or through a person who owed a duty to [Homecare] to maintain its secrecy or limit its use.

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952 F. Supp. 2d 1373, 85 Fed. R. Serv. 3d 1505, 2013 WL 3388389, 2013 U.S. Dist. LEXIS 95277, Counsel Stack Legal Research, https://law.counselstack.com/opinion/homecare-crm-llc-v-adam-group-inc-gand-2013.