A San Fernando Valley urgent care group with an owner familiar to ABC7 viewers since the coronavirus pandemic began is suing a rival health care firm, alleging the challenger company proposed talks to acquire the plaintiff, then started building a competing facility.
Mend Health Inc., the CEO of which is ABC7 personality Dr. Anthony Cardillo, filed the lawsuit Tuesday in Los Angeles Superior Court against Carbon Health Technologies Inc. and its chief medical officer, Dr. Sujal Mandavia. Carbon offers primary, urgent and virtual health care.
The suit alleges breach of contract, misappropriation of trade secrets, fraud, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing and violation of the state Business and Professions Code. Mend seeks unspecified compensatory and punitive damages.
“This is a textbook case of trade secret theft, fraud, and unfair competition,” the suit states. “It is also David versus Goliath, if Goliath had signed a nondisclosure agreement and then stolen the blueprints to David’s slingshot.”
In their court papers, lawyers for Carbon Health denied any wrongdoing on the part of their clients.
“Carbon Health’s acquisition team seriously considered acquiring (Mend) between August and October 2020,” the Carbon Health attorneys’ court papers stated.
“Months before that, Carbon Health’s new-clinic team had already planned and signed a lease for a new clinic in Sherman Oaks. (Mend) speculates that there must be some nefarious connection. There was none.”
On Thursday, Judge Mitchell L. Beckloff denied Mend’s request for a temporary restraining order preventing Carbon from opening a new facility in Sherman Oaks and from attempting to convince any of the plaintiff’s employees to join the Carbon ranks. Beckloff said there was no emergency and noted that Carbon does not plan to open a clinic in Sherman Oaks before April 1.
Beckloff said Mend can seek a preliminary injunction at a later date from Judge Mary S. Strobel, who was not available to hear Thursday’s motion.
Carbon, a large conglomerate, lured Mend, a small local competitor, into disclosing all of its confidential and proprietary information under the guise of an acquisition, the suit states.
Then, once Carbon had obtained “every last ounce of secret sauce regarding Mend’s business,” Carbon ended negotiations and announced that — despite their express representations to the contrary — they had been planning on opening a competing venture less than a one-half mile away all along,” according to the suit.
Cardillo opened Mend in June 2015, which has since grown to three urgent care facilities in the San Fernando Valley with two in Sherman Oaks and one in Burbank, the suit states.
While Mend has a “mom and pop” feel, its urgent care facilities provide high quality medical services to patients and Mend prides itself on being the neighborhood’s walk-in medical clinic, the suit states.
Carbon is one of the largest health care providers in the U.S. and in 2020 the company announced that backed with $100 million in venture capital funding, it intended to grow to 1,500 locations nationwide by 2025, the suit states.
Prior to its cash infusion, Carbon had no active presence in the San Fernando Valley and had only recently expanded its operations into Southern California the suit states.
In late August 2020, Carbon approached Cardillo about a potential acquisition opportunity, touting its interest in rapid acquisitions that could close in 45 days with expedited due diligence, the suit states.
Mend was weary about providing the blueprint for operating an effective and profitable urgent care facility in its market to a direct competitor, according to the suit.
In addition to a comprehensive nondisclosure agreement, Carbon’s representatives represented at least three times that they had no intention of opening its own facility in Mend’s market. Carbon management said it would either acquire Mend or move on and would not open a competing facility in the same market, according to the suit.
Carbon requested access to all of Mend’s most confidential proprietary and financial information and the information was provided by the plaintiffs, who believed the representations made by Carbon, the suit states.
However, after obtaining all of the information from Mend, Carbon ended the acquisition discussions, the suit states. Carbon admitted while it was seeking to acquire Mend, it was concurrently negotiating and subsequently signed a lease to open its own clinic less than a half-mile from Mend’s facility, the suit states.
“Armed with all of Mend’s operating information, financial statements, payer contracts, and patient volume history, the opening of Carbon’s new clinic is imminent and “poised to swallow the competition,” the suit alleges.
Carbon’s “dastardly machination to defraud Mend into disclosing all of its confidential and proprietary information under false pretenses cannot be countenanced,” the suit states.