GCM Partners v. Hipaaline Ltd.

GCM PARTNERS, LLC, an Illinois limited liability company, Plaintiff, v. HIPAALINE LTD., a limited company of England and Wales, and EMILY ARIDA FISHER, Defendants.

No. 20 C 6401

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

November 23, 2020

Judge Sara L. Ellis

OPINION AND ORDER

Plaintiff GCM Partners, LLC ("GCM") provides telehealth services for medical cannabis patients using Defendant Hipaaline Ltd.'s ("Hipaaline") Leafwell software platform. After Hipaaline indicated its intent to sever the parties' relationship, GCM filed this lawsuit against Hipaaline and its CEO, Emily Arida Fisher on October 28, 2020. GCM brings claims for violation of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030, and the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 et seq., as well as for Hipaaline's anticipatory and actual breaches of the parties' agreement, Fisher's tortious interference with contract, and tortious interference with prospective economic advantage. In conjunction with the filing of the complaint, GCM filed a motion for a temporary restraining order ("TRO"), asking the Court to (a) enjoin Defendants from disabling, suspending, and otherwise removing GCM's access to the Leafwell platform and its related confidential information and trade secrets, (b) enjoin Defendants from replacing GCM's third-party payment processor, Bluepay, with Hipaaline's own payment processor and collecting patient payments, and (c) require Defendants to comply with the terms of the parties' agreement. The Court received briefing from the parties and held hearings on the motion on October 30 and November 9, 2020.¹ GCM and Hipaaline agreed to a standstill arrangement pending the Court's decision, and the Court now construes the TRO motion as a motion for preliminary injunctive relief. As set forth below, the Court finds that GCM has satisfied the requirements for preliminary injunctive relief and so orders the parties to continue with their standstill arrangement.

BACKGROUND

I. Parties' Initial Relationship and the Leafwell Platform

In 2017, Dr. George Gavrilos, a pharmacist, and Dr. Steven Salzman, a doctor of osteopathy, founded a brick-and-mortar medical clinic to treat medical cannabis patients in Illinois. By fall 2018, they had expanded to locations in Maryland, Ohio, and Pennsylvania. Gavrilos formed GCM to accommodate the out-of-state expansion. To further GCM's business, Gavrilos recruited medical providers, hired clinical and patient- and provider-support staff, participated in webinars to drive attention and patient volumes, and created state-specific workflow documentation for the medical cannabis process in different states.

In May 2019, Fisher, who holds herself out as a medical cannabis marketing specialist, approached Gavrilos about expanding GCM's practice into telehealth. Fisher proposed that GCM operate telehealth clinics in states with medical cannabis programs, with Hipaaline providing marketing efforts and technological infrastructure. GCM and Hipaaline began working together, with GCM offering telehealth evaluations for medical cannabis certifications through the Leafwell platform, in October 2019. The parties did not formalize their relationshipat that time. Over the next eight months, GCM expanded its telehealth operations to twenty-one states.

To obtain a medical cannabis certification through the Leafwell platform, a patient registers to virtually meet with a GCM medical provider. Patients submit their medical history, demographic information, identification, relevant medical records, and payment details through the platform. A GCM medical provider then conducts a virtual appointment with the patient to determine whether the patient qualifies for a medical cannabis card. If so, the provider approves the patient, and the patient receives state-specific instructions for completing the certification process. GCM only charges the patient after the medical provider approves the pateint for a medical cannabis certification, using its third-party payment processor, Bluepay, to collect payment. Although the Leafwell platform does not identify GCM, it features Salzman and Dr. Lewis Jassey as experienced medical marijuana doctors and identifies Gavrilos as the chief pharmacy officer. Pursuant to Leafwell's terms of service, users agree that any information submitted through the platform "is provided on a non-proprietary and non-confidential basis" and they grant Hipaaline "a non-exclusive, perpetual, irrevocable, royalty-free, fully paid-up, worldwide license . . . to use, reproduce, process, adapt, publicly perform, publicly display, modify, prepare derivative works, publish, transmit, and distribute" any submissions. Doc. 14-1 at 12.

II. The Parties' Agreement

In July 2020, GCM and Hipaaline memorialized their business relationship in the Exclusive Marketing and Consultant Services Agreement (the "Agreement"), which reflected an effective date of October 1, 2019. The parties agreed to an initial five-year term running fromJuly 6, 2020, with the Agreement set to automatically renew for one-year terms thereafter. The Agreement allows for termination at any time only for "a material breach by the other Party":

Termination. This Agreement may be terminated by a Party prior to the expiration of the Term only upon the occurrence of a material breach by the other Party. This Agreement may not be terminated for convenience. Unless otherwise specifically stated herein, a material breach is defined by Illinois law.

Doc. 1-1 at 30. The Agreement includes a no-waiver clause, providing that "a Party's failure or refusal to enforce any right under this Agreement shall not operate as a waiver." Id. at 31. It also includes an integration clause and requires "mutual, written consent" for any amendments to the Agreement. Id. at 32, 33.

The parties focus on several areas of the Agreement, which the Court briefly sets forth below.

A. Practice of Medicine

The Agreement's recitals state that GCM "operates bricks-and-mortar medical clinics which treat patients legally via U.S. states' medical-cannabis programs" and that GCM seeks to engage Hipaaline "to perform certain marketing and consulting services related to [GCM]'s medical practice in order to facilitate its bricks-and-mortar presence and expand and enhance its telemedicine presence." Id. at 24. GCM also represented that, "[a]s of the Effective date and currently, [GCM] operates its clinics in compliance with all applicable state and federal corporate and health care rules and regulations, including with respect to corporate practice of medicine rules, licensure rules, and telemedicine guidelines." Id. at 32.

B. Exclusivity and Licenses

In § 5.6 of the Agreement, the parties agreed to an exclusive arrangement by which Hipaaline would be the sole provider of marketing and consulting services to GCM and only GCM providers would conduct evaluations through the Leafwell platform:

Exclusivity. [GCM] hereby grants [Hipaaline], during the Term of this Agreement, the exclusive right, at all bricks-and-mortar locations of [GCM], including at any new locations [GCM] may create or acquire during the Term of this Agreement, to provide the Marketing and Consultant Services related to [GCM]'s medical cannabis practice. To that end, [GCM] (or its employees, officers, or owners) shall not engage any other consultant, contractor, employee, or other person or entity to perform any service that competes, directly or indirectly, with the scope of the Marketing and Consultant Services or invest in a business or entity that does same. During the Term of this Agreement, [Hipaaline] shall not employ or engage any physician or other health care provider or practitioner to promote or utilize [Hipaaline]'s telehealth platform unless the physician or other health care provider or practitioner is an employee or independent contractor of [GCM].

Id. at 28. "Marketing and Consultant Services" include online lead acquisition, advertisement and brand recognition, technology and systems management, lead analytics, a telehealth connectivity platform, and an electronic health record system. Id. at 35-36.

To facilitate the parties' arrangement, Hipaaline provided GCM with a license to use the Leafwell platform:

License to Use [Hipaaline]'s Intellectual Property.

(a) During the Term of this Agreement and subject to [GCM]'s prompt payment of all applicable Marketing Service Fees, [Hipaaline] hereby grants to [GCM] a nontransferable, non-assignable (whether by contract or operation of law), nonexclusive, fully paid-up, and royalty-free right and license to use the [Leafwell platform] solely for [GCM]'s internal business purposes and for the purpose of rendering medical care and treatments to patients through the medical practice owned and operated by [GCM].

Id. at 28, 38. Although Hipaaline owns and has full rights to the Leafwell platform's domain name (www.leafwell.co) and the "Leafwell MD" and "Leafwell M.D." trade names, the Agreement allows GCM and Gavrilos to use the names "Leafwell MD" and "Leafwell M.D." for any legitimate business purpose during the Agreement's term. Id. at 29.

C. Payments

Section 3.3 of the Agreement provides that "[a]ll patient payments received through [Hipaaline's] telehealth platform shall be solely collected and held by [GCM]." Id. at 25. Hipaaline and GCM further agreed that GCM would pay Hipaaline $450 per hour worked, which "represent[ed] the fair market value of the Marketing and Consultant Services" and was "not based on the value or volume of services generated by [Hipaaline] on behalf of [GCM]." Id. at 38. The parties further agreed that if a regulatory agency determined that this rate exceeded fair market value or otherwise violated any applicable rules or regulations, the parties would "reasonably work together in good faith to adjust the hourly rate term of this Agreement to be in compliance." Doc. 1-1 at 38.

D. Confidential Information

The...