Elder Care Providers of Ind., Inc. v. Home Instead, Inc.

ELDER CARE PROVIDERS OF INDIANA, INC., Plaintiff, v. HOME INSTEAD, INC., Defendant.

HOME INSTEAD, INC., Counter Claimants, v. ANTHONY SMITH, GEORGETTE SMITH, PURPOSE HOME HEALTH,

INC. f/k/a Home Again Senior Care, Inc., ELDER CARE PROVIDERS

OF INDIANA, INC., Counter Defendants.

No. 1:14-cv-01894-SEB-MJD

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

March 24, 2017

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

This matter is before us on cross motions for summary judgment filed by Elder Care Providers of Indiana, Inc., Purpose Home Health, Inc., Anthony Smith, and Georgette Smith [Dkt. No. 190] and Home Instead, Inc. [Dkt. No. 192].

Facts¹

This case centers on claims for breach of a franchise agreement. Defendant Home Instead, Inc. ("Home Instead") operates a business that provides non-medical care to senior citizens through a network of more than 1,000 independently-owned franchises. Home Instead's mission statement reflects its business focus, as follows: "To be the world's trusted non-medical source of companionship and home care for seniors." [Deposition of Tanya Morrison, Director and General Counsel for Home Instead ("Morrison Dep.") at 15.] Typical Home Instead clients are senior citizens who wish to live independently in their own homes, but who are in need of home care services to enable them to do so. According to Home Instead, "[t]he term 'home care' describes two very different types of care. One, home health care provided by licensed medical professionals, for which you need a prescription and two[] non-medical home care[], such as personal care, homemaker or companionship services provided by professional caregivers." [Deposition of JohnHogan, Chief Development Officer for Home Instead ("Hogan Dep.") at 34 (quoting Dkt. No. 87-23 (Home Instead website)).]

Elder Care

Plaintiff Elder Care Providers of Indiana, Inc. ("Elder Care"), wholly owned by Anthony and Georgette Smith (the "Smiths"), was previously one of Home Instead's franchisees. On October 16, 2006, Elder Care entered into a franchise agreement with Home Instead pursuant to which Elder Care agreed to operate the Home Instead business within an exclusive geographical area on the east side of Indianapolis, Indiana for a period of ten years ("Franchise Agreement") and was granted a limited license to use Home Instead's trademarks. The Smiths personally guaranteed the Franchise Agreement. [Dkt. No. 1-1 (Franchise Agreement).] After opening their franchise in November 2006, the Smiths were successful in developing their business, becoming well respected by the other Indianapolis-area franchisees, and recognized by Home Instead for their success and growth. [Deposition of Jeff Sewell, another Home Instead franchise owner ("Sewell Dep.") at 20; Deposition of Michael Bunnell, another Home Instead franchise owner ("Bunnell Dep.") at 61; Hogan Dep. at 60-62; Dkt. No. 207 at 27 (At the time of termination of the Franchise Agreement, Elder Care's revenue was in the top 25-50% of all Home Instead franchisees) (citing Barney Decl.).]

Elder Care and other Home Instead franchisees in Indiana are each licensed as a "Personal Services Agency" ("PSA") rather than as a "Home Health Agency" ("HHA"). To obtain a PSA license, a franchisee must complete an application, demonstrate that it does background checks and tuberculosis tests on employees, explain its ownership andinsurance structure, and make a $250 annual payment. [Ind. Code § 16-27-4; Deposition of Chris Irons, Home Instead franchisee ("Irons Dep.") at 21-22; Deposition of Joseph Wrin, owner of Care Choices ("Wrin Dep.") at 15).] A licensed PSA does not require medical staff, and oversight by the Indiana State Department of Health is more limited as compared to an HHA. [Irons Dep. at 22; Wrin Dep. at 15; see Ind. Code § 16-27-4-6(e).]

In contrast, an HHA is regulated by Title 405 of the Indiana Administrative Code, when reimbursed by Medicaid, and oversight by the State is much more rigorous. [Declaration of Vivien Diemer, R.N., owner of First Horizon Consulting, Inc. ("Diemer Decl.") ¶ 6; Wrin Dep. at 15.] Among other things, HHAs provide skilled nursing and home health aide services authorized by a physician's prescription or order from other medical professionals, and supervised by a registered nurse. [See 410 IAC 17-12-2; Diemer Decl., ¶ 8; Deposition of Georgette Smith ("G. Smith Dep.") at 34-35.] An HHA license is necessary to perform skilled nursing services in the home, such as wound care (dressing, cleaning, and debriding wounds), drawing blood, injecting prescribed medications, providing medical baths, and providing periodic nursing assessments and diagnoses. [410 IAC 17-10-1(m); Diemer Decl., ¶ 7; Deposition of Anthony Smith ("A. Smith Dep.") at 21-22.]

The Smith Parties contend that all services provided to the patient under a doctor's plan of care, including meal preparation and light housekeeping, are considered medical because they are administered according to the physician's orders and at the direction of a registered nurse. [Diemer Decl., ¶ 8; A. Smith Dep. at 21-24, 27-28; Declaration of Anthony Smith ("A. Smith Decl.") ¶ 3.] Home Instead contends, however, that someservices prescribed by a physician can be considered non-medical and performed within the licensure of a PSA which would not violate its Franchise Agreements.

Home Again/Purpose

As a PSA, Elder Care provided non-medical home care to seniors. As opposed to an HHA, Elder Care was not allowed (both by its Franchise Agreement and Indiana licensure restrictions) to provide any medical care. Elder Care was required to refer its clients in need of medical care to HHAs to have their medical needs met, resulting in a disruption of the continuity of medical and non-medical care. [See G. Smith Dep. at 33.] In November 2011, Mr. and Mrs. Smith formed Home Again Senior Care, Inc., now known as Purpose Home Health, Inc. ("Home Again" or "Purpose"), a separately-licensed HHA corporation through which medical home health care is available to clients referred to it by both Elder Care and other area Home Instead franchises.² Purpose provides medical-based services; it is not licensed as a PSA. [Dimer Decl. ¶¶ 5, 7, 9; A. Smith Decl. ¶¶ 5, 6.]

Purpose and Elder Care regularly made referrals to one another. [See A. Smith Dep. at 73; Elder Care Dep. at 37-38.] In addition, Elder Care caregivers sometimes worked as Purpose home health aides, providing the greatest possible continuity of care. [A. Smith Dep. at 75.] Likewise, a number of administrative employees provided services for bothElder Care and Purpose. [Elder Care Dep. at 5-6, 33-35, 68, 78-79.] Other Home Instead franchisees in central Indiana have also developed a referral relationship with Purpose because, as stated above, Home Instead franchisees cannot provide HHA medical services. [Morrison Dep. at 91-93; 11/3/15 Deposition of Tanya Morrison ("11/3/15 Morrison Dep.") at 78-79; see also Deposition of Andrea Holt, a former Elder Care employee ("Holt Dep.") at 46-47, 49, 77, 78-79.]

Home Instead's Investigation of the Smiths, Elder Care, and Home Again

Not until March 2013 did Home Instead first learn of Home Again's operations,³ which gave rise to two concerns: (1) the possible confusion caused by the use of the name "Home Again";⁴ and (2) the possibility that Home Again would provide services in direct competition with Home Instead.

The Franchise Agreement prohibits Elder Care and the Smiths from competing with Home Instead and making unauthorized use of any Home Instead licensed mark. With regard to prohibited competition, the Franchise Agreement provides as follows:

In consideration for this specialized training, Trade Secrets, Confidential Information and rights, Franchisee covenants that during the term of this Agreement and for a period of two (2) years following the expiration or termination of this Agreement, that neither Franchisee nor any of its officers, directors, managers or employees shall, either directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership, corporation or limited liability company:

(1) divert, or attempt to divert, any business or customer of the Franchised Business to any competitor, by direct or indirect inducement or otherwise, or to perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Licensed Marks and the System;

(2) own, maintain, operate, engage in, or have any financial or beneficial interest (including any interests in any corporations, partnerships, trusts, limited liability companies, incorporated associations or joint ventures) advise, assist, or make loans to, any non-medical companionship and domestic care service business that is of a character and concept similar to the HOME INSTEAD SENIOR CARE Business. As used in this Agreement, the term "similar" means a business which looks like, copies, imitates or operates in a manner similar to a HOME INSTEAD SENIOR CARE Business, including, but not limited to, any non-medical service business, and which business is, or is intended to be, located at the location of the HOME INSTEAD SENIOR CARE Business. The term "non-medical companionship and domestic care service business" for purposes of this paragraph shall mean companionship and domestic care services which include, but are not limited to, companionship, light housekeeping, meal preparation, errands, incidental transportation, assistance in laundry and other activities for the benefit of the customer, reminders to take medication (both prescription and over-the-counter), assistance in grooming, bathing, personal hygiene, assistance with problems such as incontinence and other personal care services as defined by Franchisor throughout the term of this Agreement.

[Franchise Agreement at ¶ 17(C)(2) (marks in original exhibit tendered to the court).]

The Franchise Agreement's limitations on the use of Home...