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Professional Billing, Inc. v. Zotec Partners, LLC

Court of Appeals of Indiana

April 4, 2018

Professional Billing, Inc., Appellant-Defendant,
Zotec Partners, LLC, and Medical Management Professionals, LLC, Appellees-Plaintiffs

          Appeal from the Marion Superior Court The Honorable Heather A. Welch, Judge Trial Court Cause No. 49D01-1612-PL-44334

          ATTORNEYS FOR APPELLANT Mark D. Gerth Sarah A. Hurdle Kightlinger & Gray, LLP Indianapolis, Indiana

          ATTORNEYS FOR APPELLEES Robert D. MacGill Charles P. Edwards Alexander P. Orlowski Leah L. Seigel Barnes & Thornburg, LLP Indianapolis, Indiana

          BAKER, JUDGE.

         [¶1] Professional Billing, Inc. (PBI), brings an interlocutory appeal from the trial court's denial of its motion to dismiss the claims filed against it by Zotec Partners, LLC, and Medical Management Professionals, LLC (collectively, Zotec). PBI argues that dismissal is warranted because the trial court lacks personal jurisdiction over it. Zotec argues that the trial court should be affirmed; it alternatively requests additional time to conduct discovery. Finding that Indiana cannot assert personal jurisdiction over PBI and that additional time for discovery is unwarranted, we reverse and remand with instructions for the trial court to dismiss Zotec's claims against PBI.


         [¶2] Zotec is a medical billing company with its principal place of business in Carmel. In 2013, Zotec acquired a competitor, and as part of the acquisition, Zotec agreed to retain the competitor's CEO, G. Darrell Hulsey, who became an executive at Zotec. Hulsey's employment agreement with Zotec included a non-compete provision that would last for two and one-half years after any termination of Hulsey's employment. In February 2014, Hulsey resigned from Zotec. In September 2016, he became PBI's CEO and purchased an ownership stake in the company.

         [¶3] PBI is a medical billing company incorporated and headquartered in Alabama. It has offices in Alabama, Louisiana, Mississippi, and Ohio. It is not registered to do business in Indiana. It has no offices, real estate, employees, or customers in Indiana. It has no contracts with anyone in Indiana.

         [¶4] On December 19, 2016, Zotec filed a complaint against PBI, Hulsey, and another company.[1] On February 16, 2017, PBI filed its first motion to dismiss for lack of personal jurisdiction. On March 17, 2017, Zotec filed an amended complaint against PBI, alleging that PBI violated Indiana's Uniform Trade Secrets Act and committed tortious interference with contract. Specifically, Zotec alleged that PBI misappropriated Zotec's trade secrets by obtaining them from Hulsey, knowing that Hulsey obtained Zotec's trade secrets through improper means, and by using them to compete with Zotec. Zotec further alleged that PBI targeted and induced certain Zotec customers to terminate their contractual relationships with Zotec. Zotec did not allege that PBI solicited Zotec's customers in Indiana.

         [¶5] On April 6, 2017, in response to Zotec's amended complaint, PBI filed a second motion to dismiss Zotec's claims against it for lack of personal jurisdiction. In support of its motion to dismiss, PBI submitted an affidavit from Douglas Bush, PBI's president and CFO. In his affidavit, Bush stated that PBI is incorporated and headquartered in Alabama; that it has offices in Alabama, Louisiana, Mississippi, and Ohio; and that PBI has never had or solicited customers in Indiana, owned or leased offices or real estate in Indiana, employed anyone in Indiana, entered into contracts with anyone in Indiana, or registered to do business in Indiana. Bush further stated that PBI had no communication with Hulsey while he was employed by Zotec and that it was not until May 2016- more than two years after Hulsey had left Zotec-that PBI initiated conversations with Hulsey about joining PBI. Bush also stated that he and Hulsey are friends and that any conversations between them before May 2016 were purely social and were undertaken by Bush as an individual, not as a representative of PBI.

         [¶6] On May 1, 2017, Zotec opposed PBI's motion to dismiss, arguing that PBI did not meet its burden to prove a lack of personal jurisdiction, or, alternatively, that Zotec should be granted additional time "to obtain the discovery it has been seeking from Hulsey for almost four months and, if necessary, obtain jurisdictional discovery directly from PBI." Appellant's App. Vol. II p. 108.

         [¶7] On May 22, 2017, a hearing regarding the motion to dismiss took place. On June 27, 2017, the trial court denied PBI's motion, making the following findings of fact:

25. Presently, Hulsey is an owner and the Chief Executive Officer of PBI. PBI offers medical billing and technology solutions to physicians and other healthcare providers in competition with Zotec.
26. PBI is a competitor of Zotec whom Zotec believes has recently begun activity soliciting Zotec's customers.
27. Hulsey is personally soliciting Zotec's customers on behalf of PBI through his knowledge of Zotec's Confidential Information and trade secrets. Because of his role at Zotec . . . Hulsey is keenly aware of Zotec's trade secrets, . . . Zotec's proprietary software and confidential business practices, and which clients are most receptive to transitioning to PBI.
28. As a result of Defendants' actions, Zotec has incurred significant damages, including lost clients.

         Appealed Order p. 5. The trial court then made the following conclusions of law:

. . . the Court cannot but find that the facts of the case as alleged provide this Court with specific personal jurisdiction over PBI in this matter. The allegations against PBI are violations of Indiana's Trade Secret Act and tortious interference with contract. . . . [T]he allegations on the face of the complaint argue that Hulsey was acting intentionally and tortuously [sic] when [he] left Zotec to join a competitor, knowing that disclosure of Zotec's trade secrets would constitute harm to Zotec. The express aim at the State of Indiana arises out of the alleged harms. The Indiana Trade Secret Act is a statutory protection given to persons and companies that conduct business in the State of Indiana. While other states have similar trade secret acts, Indiana's Act was created by the legislative action of the Indiana General Assembly for the benefit of those citizens and domiciled companies that wish to conduct business. Committing an act which directly implicates this statute directly involves Indiana in the alleged tortious conduct. Essentially, the alleged misappropriation involves taking/copying a protectable interest from an Indiana company and disseminating it. Even if Hulsey was not an agent of PBI when the alleged misappropriation took place, PBI placed Hulsey as an executive within the company, giving him significant control of the company's operations. This dovetails with Zotec's allegation of tortious interference with contract regarding Zotec customers. Even if PBI had never made contact with Indiana prior to hiring Hulsey, the allegations surrounding Hulsey's conduct and PBI's involvement subject PBI to jurisdiction in this Court by way of specific personal jurisdiction.
Appealed Order p. 9-10. PBI now brings this interlocutory ...

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