Symbria, Inc. v. Callen

Symbria, Inc. et al., Plaintiffs, v. John Callen, et al., Defendants.

No. 20-cv-4084

United States District Court, N.D. Illinois, Eastern Division

January 6, 2022

MEMORANDUM OPINION AND ORDER

MARY M. ROWLAND, United States District Judge.

This case arises from a business fallout. Plaintiffs Symbria Inc., Symbria Rehab, Inc., Alliance Rehab of Connecticut LLC, Alliance Rehab HVA, LLC, GreatBanc trust Company, and the Symbria, Inc. Employee Stock Ownership Trust claim that their former corporate officers and employees formed a venture to compete against them in the field of rehabilitation and wellness services to senior living and skilled nursing facilities. Did their actions amount to unlawful competition? Plaintiffs claim they do. Accordingly they bring a sixteen-count third amended complaint alleging that Defendants violated a host of federal and state laws including trade secret misappropriation, copyright infringement, breach of contract, breach of fiduciary duty, and tortious interference. Defendants have moved to dismiss the claims against them. [210]; [212]; [214]; [215]. For the reasons explained below, this Court grants in part and denies in part the motions.

I. Background

This Court accepts as true the following factual allegations from the third amended complaint (TAC) [164]. See Bilek v. Fed. Ins. Co., 8 F.4th 581, 586 (7th Cir. 2021).

A. The Parties

Plaintiff Symbria, Inc. (Symbria) constitutes the parent company of businesses providing clinical health services for senior living and post-acute care providers. [164] ¶ 2. In 2015, Symbria's owners sold the company to an employee stock ownership plan (ESOP) trust, making Symbria an employee-owned company. Id. ¶ 2. Plaintiff Symbria Rehab, Inc. (Symbria Rehab) is Symbria's wholly-owned subsidiary. Id. ¶ 3. Symbria Rehab provides rehabilitation services for residents and patients of senior living and post-acute care providers, including health and wellness programs, by entering into exclusive contracts with those providers. Id.

Plaintiff Alliance Rehab of Connecticut, LLC (Alliance Connecticut) is a Connecticut limited liability company majority-owned by Symbria Rehab. Id. ¶ 4. Like Symbria Rehab, Alliance Connecticut provides rehabilitation services for residents and patients of senior living and post-acute care providers. Id. ¶ 4. Alliance Connecticut enters into exclusive contracts with providers in the state of Connecticut. Id. Similarly, Plaintiff Alliance HVA, LLC (Alliance HVA) is a Pennsylvania limited company, majority-owned by Symbria Rehab. Id. ¶ 5. Alliance HVA provides the same services as Alliance Connecticut and Symbria Rehab and does so through exclusive contracts with providers in Pennsylvania. Id.

Plaintiffs refer to Symbria, Symbria Rehab, Alliance Connecticut, and Alliance HVA collectively as Symbria and Affiliates. Id. ¶ 8. Plaintiff GreatBanc Trust Company serves as the Trustee of the Symbria ESOP Trust. Id. ¶ 6. The Symbria ESOP Trust is also a named Plaintiff. Id. ¶ 7.

Defendant John R. Callen served as Symbria Rehab's president from 1999 to January 12, 2017. Id. ¶ 9.

Defendant United Methodist Homes & Services (UMHS) provides services and residences for older adults. Id. ¶ 10. UMHS owned Symbria until October 31, 2015. Id. ¶ 10. William Lowe, a non-party, is UMHS' president and served on its board of directors through at least May 2019. Id. ¶ 10.

Defendant Christos Dilmas worked as a Program Manager/Physical Therapist for Symbria Rehab from October 31, 2013 to October 2, 2016, when Symbria Rehab promoted Dilmas to Regional Director of Operations. Id. ¶ 11. Dilmas then served as Regional Director of Operations until September 25, 2019. Id. ¶ 11.

Christine Irvine, who the TAC named as a Defendant but has since settled, worked for Symbria Rehab as an Exercise Physiologist starting in August 2004; Symbria Rehab promoted her to Rehab and Wellness Manager in January 2007, to Client Relations Liaison in May 2011, and then to Area Director on October 3, 2016. Id. ¶ 12. As Area Director, Irvine reported directly to Dilmas. Id. When Irvine resigned from Symbria Rehab effective February 22, 2019, she went to an entity called Plymouth Place, where she remains employed. Id. ¶¶ 12, 14. Plymouth Place is a senior living facility and client of Symbria's subsidiary Symbria Rx Services, LLC. Id. ¶ 109. In January 2019, Plymouth Place's wholly-owned subsidiary purchased minority interests in Defendants Joint & Neuro and IASN. Id.

Defendant MedRehab Alliance Holdings, Inc. (MedRehab Holdings) is UMHS' wholly-owned holding company. Id. ¶ 13. Lowe serves as president and secretary for MedRehab Holdings. Id.

Defendant MedRehab Alliance, LLC (MedRehab Alliance) provides rehabilitation management services to hospitals, health systems, skilled nursing facilities, outpatient clinics, and home health agencies. Id. ¶ 14. Lowe manages MedRehab Alliance, while Callen serves as president, CEO, and managing partner. Id. ¶ 14. UMHS and Callen each own 25.974 percent of MedRehab Alliance. Id.

Defendant MedRehab Alliance Interstate, LLC (MedRehab Interstate) provides rehabilitation management services to hospitals, health systems, skilled nursing facilities, outpatient clinics, and home health agencies in states outside Illinois. Id. ¶ 15. MedRehab Interstate is majority-owned by MedRehab Holdings and therefore by UMHS. Id. ¶ 15. MedRehab Interstate employs four managers, including Callen and Lowe. Id. ¶ 15. Through MedRehab Holdings and MedRehab Alliance, UMHS owns 60 percent of MedRehab Interstate. Id.

Defendant Illinois Ancillary Services Network, LLC (IASN) provides ancillary and home health care services. Id. ¶ 16. MedRehab Alliance owns IASN, and thus, UMHS and Callen also each own 25.974 percent of IASN. Id. IASN owns Defendant Pearl Health Services, Inc. (Pearl), a home healthcare agency providing nursing, physical therapy, occupational therapy, speech pathology, and other home health services. Id. ¶¶ 16, 17. UMHS and Callen each own an indirect controlling interest in Pearl. Id. ¶ 17.

Defendant Chicago Rehabilitation Collective PLLC (Chicago Rehab) provides medical services through healthcare professionals including physical therapists, occupational therapists, speech therapists, and respiratory therapists. Id. ¶ 18. Callen manages Chicago Rehab. Id. Chicago Rehab hired Defendant Dilmas when he resigned from Symbria Rehab. Id.

Defendant MedRehab Therapy Associates of Illinois, LLC (MedRehab Therapy) provides clinical health services for senior living and post-acute care providers. Id. ¶ 19. Callen manages and owns, in part, MedRehab Therapy. Id.

Defendant Joint & Neuro Rehab Associates, LLC (Joint & Neuro) provides acute and post-acute rehabilitation staffing and management services to hospitals, health systems, outpatient physical therapy, pain management, and musculoskeletal clinics, skilled nursing facilities, home health agencies, and senior care communities. Id. ¶ 20. Callen manages and owns Joint & Neuro. Id.

Defendant MedRehab Alliance Wisconsin, LLC (MedRehab Wisconsin) provides rehabilitation management services. Id. ¶ 21. MedRehab Alliance owns MedRehab Wisconsin, and through MedRehab Alliance, UMHS and Callen each own a controlling interest in MedRehab Wisconsin. Id.

Plaintiffs refer to MedRehab Holdings, MedRehab Alliance, MedRehab Interstate, IASN, Pearl, Chicago Rehab, Joint & Neuro, MedRehab Therapy, and MedRehab Wisconsin as the MedRehab Entities. Id. ¶ 22. The MedRehab Entities all operate out of three small office locations: (1) a small, leased office suite in Rosemont, Illinois; (2) offices with UMHS' headquarters and senior living facility in Chicago; and (3) a small, leased office in Pennsylvania. Id. ¶ 23. The MedRehab Entities share employees among each other, and Chicago Rehab “loans” employees, including former employees of Symbria and Affiliates, to Joint & Neuro, MedRehab Alliance, and MedRehab Interstate. Id. ¶ 24. An employee of UMHS serves as Busines Director of Pearl. Id. Callen, MedRehab Alliance, MedRehab Interstate, Pearl, and MedRehab therapy jointly maintain electronic documents in a cloud account registered to MedRehab Alliance. Id. ¶ 25.

B. Sale of Symbria

On October 31, 2015, UMHS and the other twelve owners of Symbria sold their stock in Symbria. Id. ¶ 28. One of the owners sold its interest only for cash, but UMHS and the other eleven owners entered into a stock purchase agreement (SPA) pursuant to which they sold their stock in Symbria to an ESOP trust in exchange for cash, subordinated notes provided by Symbria, and warrants to purchase shares of stock in Symbria in the future. Id. Plaintiffs allege that because UMHS and the other parties to the SPA had an ongoing stake in Symbria's success, they covenanted under the SPA to: (1) not compete, directly or indirectly, or have an direct or indirect ownership in any business in Illinois that competes with Symbria and its subsidiaries; (2) not solicit Symbria's and its subsidiaries' clients and prospective clients; and (3) not solicit the employees of Symbria and its subsidiaries. Id. ¶ 34.

Each covenant lasts until the later of the fifth anniversary of the closing date under the SPA or until the selling owners' subordinated notes are fully paid. Id.

Further, all owners who were sellers, including UMHS, agreed to several restrictive covenants under the SPA. Section 5.3 provides for the maintenance of confidential information:

Non-Disclosure of Confidential Information. From and after the Closing, Sellers agree not to divulge, communicate, use to the detriment of the Company Group or the ESOP Trust, for the benefit of any other Person, or misuse in any way, any confidential information or trade secrets owned by or relating to the Company Group,

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