Baker et al v. Healthfusion, Inc. et alMOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Motion To Dismiss Plaintiffs' Amended ComplaintD. Mass.January 12, 2017 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS CHRISTOPHER P. BAKER, and ANASAZI PARTNERS III OFFSHORE FUND, LTD. Plaintiffs, v. HEALTHFUSION, INC., QUALITY SYSTEMS, INC., SOL LIZERBRAM, JONATHAN FLAM, and SETH FLAM Defendants. Civil Action No.: 1:16-CV-12058-ADB JURY TRIAL DEMANDED HEALTHFUSION, INC., QUALITY SYSTEMS, INC., SOL LIZERBRAM, JONATHAN FLAM, AND SETH FLAM DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ AMENDED COMPLAINT Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 1 of 19 -i- TABLE OF CONTENTS Page I. INTRODUCTION .......................................................................................................... 1 II. PROCEDURAL HISTORY ............................................................................................ 2 III. ALLEGATIONS IN THE AMENDED COMPLAINT ................................................... 3 IV. MOTION TO DISMISS ................................................................................................. 6 A. The Complaint Should Be Dismissed in its Entirety ............................................ 6 1. Plaintiffs’ First Count for Breach of Contract Fails .................................. 6 2. Plaintiffs’ Duplicative Breach of the Implied Covenant Claim Is Not an Independent Claim and Falls with the Demise of the First Count for Breach of Contract ................................................................... 9 B. The Count for Intentional Interference with Contractual Relations Fails .............. 9 C. The Amended Complaint Should Be Dismissed Against QSI and the Individual Defendants ........................................................................................12 V. CONCLUSION .............................................................................................................13 Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 2 of 19 -ii- TABLE OF AUTHORITIES Page(s) CASES Amcan Holdings, Inc. v. Can. Imperial Bank of Commerce, 70 A.D.3d 423 (NY App. Div. 2010) ............................................................................... 9 Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503 (1994) ............................................................................................... 10, 11 Asahi Kasei Pharma Corp. v. Actelion Ltd., 222 Cal. App. 4th 945 (2013)......................................................................................... 10 Barricello v. Wells Fargo Bank, N.A., No. 13-12795-MLW, 2016 U.S. Dist. LEXIS 37773 (D. Mass. Mar. 22, 2016) ................................................................................................. 6 Beacon Syracuse Assocs. v. City of Syracuse, 560 F. Supp. 188 (N.D.N.Y. 1983) ................................................................................ 12 Blackstone v. Cashman, 448 Mass. 255 (2007) .................................................................................................... 10 Calden v. Arnold Worldwide LLC, No. 12-10874-FDS, 2012 U.S. Dist. LEXIS 167967 (D. Mass. Nov. 27, 2012) ................................................................................................. 6 Crabtree v. Tristar Auto. Grp., Inc., 776 F. Supp. 155 (S.D.N.Y. 1991) ................................................................................. 12 Durand v. IDC Bellingham, L.L.C., 440 Mass. 45 (2003) ...................................................................................................... 10 G.S. Enters., Inc. v. Falmouth Marine, Inc., 410 Mass. 262 (1991) .................................................................................................... 10 Hinchey v. Nynex Corp., 144 F.3d 134 (1st Cir. 1998) ............................................................................................ 8 Hosack v. Utopian Wireless Corp., No. DKC 11-0420, 2011 U.S. Dist. LEXIS 48687 (D. Md. May 6, 2011) ...................... 13 In re Stac Elecs. Sec. Litig., 89 F.3d 1399 (9th Cir. 1996) ............................................................................................ 4 Knievel v. ESPN, 393 F.3d 1068 (9th Cir. 2005) .......................................................................................... 4 People v. Pereira, 207 Cal. App. 3d 1057 (1989) ........................................................................................ 10 Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 3 of 19 -iii- Rederford v. U.S. Airways, Inc., 589 F.3d 30 (1st Cir. 2009) .............................................................................................. 3 Reeves v. Hanlon, 33 Cal. 4th 1140 (2004) ................................................................................................. 10 Reiss v. Fin. Performance Corp., 764 N.E.2d 958 (N.Y. 2001) ............................................................................................ 6 Sapta Global, Inc. v. Cilicorp, LLC, No. 13-3698 (KM)(MAH), 2015 U.S. Dist. LEXIS 40186 (D.N.J. Mar. 30, 2015) ..................................................................................................... 8 Speirs v. BlueFire Ethanol Fuels, Inc., 243 Cal. App. 4th 969 (2015)........................................................................................... 6 Watterson v. Page, 987 F.2d 1 (1st Cir. 1993) ................................................................................................................. 3 RULES Fed. R. Civ. P. 12(b)(6) ........................................................................................................... 1, 5 LR, D. Mass 7(1)(a)(2) ................................................................................................................ 2 LR, D. Mass 7(a)(1)(2) ................................................................................................................ 1 MISCELLANEOUS Investopedia, http://www.investopedia.com/terms/w/warrant.asp (last visited Jan. 11, 2017) ............................................................................................... 6 Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 4 of 19 -1- I. INTRODUCTION Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Defendants HealthFusion, Inc. (“HealthFusion”), Quality Systems, Inc. (“QSI”), Sol Lizerbram, Jonathan Flam and Seth Flam (collectively, “Defendants”) hereby move to dismiss Plaintiffs’ Amended Complaint (“Amended Complaint” or “AC”) for failure to allege any cognizable claim. Because this is Plaintiffs’ second deficient complaint, Defendants respectfully request that the instant motion be granted without leave to amend.1 Plaintiffs’ Amended Complaint reasserts two claims - one for breach of contract and one for breach of the implied covenant of good faith and fair dealing - allegedly arising out of Defendants’ failure to honor the terms of warrant agreements between HealthFusion and Plaintiffs. But once again, Plaintiffs neither attach the agreement(s) at issue nor describe the parties’ obligations and rights under the purported agreement(s). And once again, Plaintiffs fail to identify the consideration supporting any such agreement(s), and further fail to describe how their alleged damages are calculated. These fundamental defects doom Plaintiffs’ breach-of- contract based Amended Complaint. Plaintiffs’ Amended Complaint also adds a third count - in cursory manner - for intentional interference with contractual relations against the individual defendants. This tack-on claim is defective for at least two reasons. First, without an underlying breach of contract claim (and there is none here as noted above), the interference claim necessarily fails. But this claim also fails because the individual defendants allegedly “interfering” with Plaintiffs’ warrant agreements are all officers and agents of HealthFusion acting in that capacity, and it is hornbook law that a party cannot intentionally interfere with its own contract. For these reasons, Plaintiffs’ newly-added third count for intentional interference with contractual relations fails. 1 Consistent with Rule 7(a)(1)(2) of the Local Rules of this Court, Defendants’ counsel contacted Plaintiffs’ counsel to see if the parties could avoid motion practice. The parties did not reach an accord. Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 5 of 19 -2- Defendants submit that their motion to dismiss should be granted. Because Plaintiffs have again failed: to attach the contract at issue (or set forth all salient terms, including the expiration of the alleged warrants at issue), to identify the consideration supporting the alleged agreements, and/or to show how their damages are calculated, Defendants request that this motion be granted without leave to amend. II. PROCEDURAL HISTORY On October 13, 2016, Plaintiffs filed their original complain (“Complaint”). Dkt. No. 1, and subsequently served the Complaint on Defendants in November 2016. On December 12, 2016, Defendants’ counsel, consistent with Rule 7(1)(a)(2) of the Local Rules of this Court, sent Plaintiffs’ counsel an email highlighting the deficiencies in the Complaint and asking Plaintiffs to voluntarily amend their Complaint to avoid motion practice. In an email response on December 13, 2016, Plaintiffs’ counsel declined the request. On December 16, 2016, Defendants filed their Motion to Dismiss and Alternative Motion for More Definite Statement. Dkt. No. 16. In that motion, Defendants argued, inter alia, that the Complaint was deficient for numerous reasons, including the failure to attach the contract (or detail the salient terms), the failure to allege that there were even any non-expired warrants between Plaintiffs and HealthFusion, the failure to allege the consideration that supported any supposed extension of the warrant(s) at issue, and the failure to describe how damages were calculated. Id. at 4-7. Defendants also showed that the duplicative claim for breach of the implied covenant was defective, and that in all events Plaintiffs stated no cognizable claim against the individuals or QSI, given that the alleged warrant(s) at issue were only between Plaintiffs and HealthFusion. Id. at 7-9. Notwithstanding their December 13, 2016 refusal to amend their complaint, Plaintiffs opted to do just that instead of responding to Defendants’ motion. On December 29, 2016, Plaintiffs filed their second, or Amended Complaint. Dkt. No. 19. Plaintiffs’ Amended Complaint made mostly cosmetic changes to the original Complaint, including referring to Defendant Quality Systems, Inc. as “QSI” as opposed to “Quality Systems,” (AC ¶¶ 4, 26), Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 6 of 19 -3- referring to the allegedly extended warrants as “replacement warrants” instead of “new warrants” (AC ¶ 21), and stating that HealthFusion extended “the expiration dates” of the warrants, as opposed to simply stating that HealthFusion extended the warrants (AC ¶¶ 20, 42).2 For the Court’s convenience, attached hereto as Exhibit A is a true and correct copy of a “redline” reflecting the changes made by Plaintiffs in their Amended Complaint. III. ALLEGATIONS IN THE AMENDED COMPLAINT The key allegations (and deficiencies) remain the same in Plaintiffs’ Amended Complaint. This pleading realleges alleges that Plaintiff Chris Baker invested in HealthFusion “[b]eginning in approximately 2005,” and that in connection with that investment, HealthFusion issued warrants which entitled Mr. Baker to purchase 450,000 shares of common stock in HealthFusion. AC ¶ 15. The Amended Complaint again alleges that Mr. Baker caused Plaintiff Anasazi Partners III Offshore Fund, Ltd. (“Anasazi III Offshore”) to invest in HealthFusion; and in connection with this investment, “HealthFusion issued warrants by which Anasazi III Offshore was entitled to purchase 187,500 shares of [HealthFusion] common stock.” AC ¶ 17. The Amended Complaint further alleges that defendant Sol Lizerbram, HealthFusion’s chairman, communicated with Plaintiff Baker via email in 2012 and said that “by virtue of this e- mail I am confirming that a replacement Warrant with an extended date will be issued.” AC ¶ 21.3 2 The three more notable additions to the SAC - new paragraph 20, new paragraph 36, and new Count III for Interference with Contractual Relations - are discussed infra. 3 Although quoting from this email in their Complaint and Amended Complaint, Plaintiffs fail to attach the communication to their pleading. The email thread containing the communications between Mr. Baker and Mr. Lizerbram was attached as Exhibit A to Defendants’ first motion to dismiss (Dkt. No. 16), and is reattached here as Exhibit B. As recognized by this (and other) federal circuits, the Court may properly take judicial notice of this document on a motion to dismiss because Plaintiffs have relied on and fairly incorporated this communication in their Complaint. See Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir. 1993) (noting that courts may consider documents not attached to Complaint on a motion to dismiss in certain circumstances, including when the documents are “sufficiently referred to in the complaint.”); Rederford v. U.S. Airways, Inc., 589 F.3d 30, 35 (1st Cir. 2009) (noting that on motion to dismiss, the court “may (continued...) Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 7 of 19 -4- Evidently in response to Defendants’ motion to dismiss noting that the Complaint failed to allege that HealthFusion actually issued new/replacement warrants to Plaintiffs (while containing such specific allegations for non-parties), the Amended Complaint states in new paragraph 20 that Plaintiff Baker brought to Defendant Lizerbram’s attention that warrants of other investors had been extended and that HealthFusion “similarly extended the expiration dates of the warrants described in paragraphs 15-19,” which includes Plaintiffs’ warrants. AC ¶ 20.4 The Amended Complaint realleges that the warrants issued by HealthFusion to Plaintiffs specifically state that the warrant obligations shall be binding on any acquiring corporation. AC ¶ 23. On October 30, 2015, HealthFusion entered into an Agreement and Plan of Merger (“Merger Agreement”) with Quality Systems, Inc. (“QSI”). AC ¶ 26. On November 12, 2015, HealthFusion issued a Warrant Notice and Consent which advised that at the closing of the QSI transaction, each unexercised HealthFusion Warrant shall be converted into the right to receive, on a pro rata basis, the consideration paid to HealthFusion stockholders agreed upon as part of the QSI transaction. AC ¶¶ 27-28. Plaintiffs allege that they received the Warrant Notice and Consent. AC ¶ 30. Following the merger, Plaintiffs allege that HealthFusion paid Baker Securities (not a party to this action) compensation for all of its outstanding warrants, as extended. AC ¶ 31. (...continued from previous page) consider not only the complaint but also ‘facts extractable from documentation annexed to or incorporated by reference in the complaint’” and other materials subject to judicial notice (citation omitted)); Knievel v. ESPN, 393 F.3d 1068, 1076-77 (9th Cir. 2005) (noting that Court may consider the entirety of the document referenced in the Complaint, even if the Complaint only refers to selected portions of those documents); In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1405 n.4 (9th Cir. 1996) (finding that district court’s judicial notice of full text of document, including portions of which were not mentioned in the Complaints, was proper). 4 Despite this allegation, Plaintiffs do not attach the new/replacement warrants to their Amended Complaint. Nor do Plaintiffs identify what the new expiration date is in these new/replacement warrants. Nor do Plaintiffs set forth the consideration supporting the new/replacement warrants. Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 8 of 19 -5- Similarly, Plaintiffs allege that Anasazi III Domestic (again, not a party here) was paid in full by HealthFusion for its warrants, as extended. AC ¶ 32. The Amended Complaint again alleges that Plaintiff Baker was only partially compensated by HealthFusion for his warrants, as extended (and is owed approximately $100,000). AC ¶ 34. The Amended Complaint also realleges that Plaintiff Anasazi III Offshore was not paid at all for its warrants, as extended, and is owed approximately $214,000). AC ¶ 33. Plaintiffs do not articulate how these alleged damages were computed. The Amended Complaint adds a new paragraph which alleges that defendants Lizerbram, Jonathan Flam and Seth Flam “wrongfully caused HealthFusion and QSI to withhold payments due to Mr. Baker and Anasazi III Offshore pursuant to their extended warrants.” AC ¶ 36. Messrs. Lizerbram, Jonathan and Seth Flam were officers and directors of HealthFusion. AC ¶ 22. Based on the foregoing allegations, Plaintiffs again assert one claim for breach of the allegedly enforceable warrant agreements between Plaintiffs and HealthFusion, and one claim for breach of the implied covenant of good faith and fair dealing that attached to the warrant contracts. AC ¶¶ 37-58. Plaintiffs’ Amended Complaint seeks the same remedies - an award of the same monetary damages, or alternatively, specific performance - for each of the warrants issued by HealthFusion to Plaintiffs, under each claim. See AC, Prayer for Relief. The Amended Complaint adds a third count for Intentional Interference with Contractual Relations against the individual defendants, who are on HealthFusion’s board (and officers of the Company). AC ¶¶ 59-63, 22. Pursuant to Rules 12(b)(6) of the Federal Rules of Civil Procedure, Defendants now move to dismiss the Amended Complaint, and request that the motion be granted without leave to amend. Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 9 of 19 -6- IV. MOTION TO DISMISS A. The Complaint Should Be Dismissed in its Entirety 1. Plaintiffs’ First Count for Breach of Contract Fails Plaintiffs repeatedly allege that “[t]he warrants issued by HealthFusion to Plaintiffs . . . were enforceable contracts,” and this foundational allegation animates the first two counts in the Amended Complaint. AC ¶¶ 38, 50.5 Yet Plaintiffs fail to attach the operative agreement(s) to their Amended Complaint or even detail the terms of the alleged agreements - including the terms of any supposed extension of the warrants and the consideration exchanged that would support any such extension. Plaintiffs also fail to allege how they computed their alleged damages. Again, these failures alone warrant dismissal of the Amended Complaint for failure to state a valid cause of action. See Calden v. Arnold Worldwide LLC, No. 12-10874-FDS, 2012 U.S. Dist. LEXIS 167967, at *15 (D. Mass. Nov. 27, 2012) (dismissing breach of contract claim where “the complaint does not set forth any details about the alleged breach of contract. No contract is alleged. No specific contract provisions are set forth. The nature of the alleged breach of contract is not identified.”); Barricello v. Wells Fargo Bank, N.A., No. 13-12795- MLW, 2016 U.S. Dist. LEXIS 37773 (D. Mass. Mar. 22, 2016) (“To plead breach of contract, the plaintiff must describe ‘the nature of the alleged contract[,] what obligations were imposed 5 As the Court likely knows, a stock warrant is a contractual arrangement that confers the right - but not the obligation - to buy or sell a security at an agreed upon price, before expiration of the warrant. Investopedia, http://www.investopedia.com/terms/w/warrant.asp (last visited Jan. 11, 2017); see also Speirs v. BlueFire Ethanol Fuels, Inc., 243 Cal. App. 4th 969, 982 (2015) (“stock warrants are contracts entitling the holder to purchase a specified number of shares of stock for a specific price during a designated time period” (quoting Reiss v. Fin. Performance Corp., 764 N.E.2d 958 (N.Y. 2001)). Once a warrant expires, it is worthless. Investopedia, supra (“All warrants have an expiration date - the last day that the rights of the warrant can be exercised. If a warrant is not exercised before the end of its fixed tenure, it expires worthless.”). Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 10 of 19 -7- on each of the parties by the alleged contract[, and] the damages attributable to the breach.’” (alterations in original) (citation omitted)). These pleading deficiencies are especially noteworthy given what Plaintiffs have (again) omitted from their pleading. Plaintiffs quote from a late 2012 email communication between Plaintiff Baker and Defendant Lizerbram wherein Lizerbram says a replacement warrant with an extended expiration date will issue (AC ¶ 21). However, Plaintiffs fail to include a copy of that communication. Perhaps this is so because the complete email thread reflects, by Plaintiffs’ own admission, that Plaintiffs’ warrants had already expired by the time of this 2012 communication. See Exhibit B at 3-4 (summary by Mr. Baker’s employee, Todd Brady, stating that Plaintiff Baker’s warrants and Plaintiff Anasazi III Offshore’ s warrants had all expired by September 15, 2010). Expired warrants are, of course, worthless. Thus, even if new warrant(s) were issued to Plaintiffs with an extended expiration date (as Plaintiffs now conclusorily state in the Amended Complaint (AC ¶ 20)), then Plaintiffs should be required to identify the consideration from Plaintiffs supporting the newly issued, or “replacement” warrant(s). Plaintiffs have not identified any consideration for the issuance of these extended warrants; thus, the Amended Complaint cannot stand. It is hornbook law that: “[I]n order for a contract to have valid consideration, the contract must be a bargained-for exchange in which there is a legal detriment of the promisee or a corresponding benefit to the promisor.” Frankina v. First Nat’l Bank of Boston, 801 F. Supp. 875, 886 (D. Mass. 1992), aff’d, 991 F.2d 786 (1st Cir. 1993) (citing Graphic Arts Finishers, Inc. v. Boston Redevelopment Auth., 357 Mass. 40, 225 N.E.2d 793, 795 (1970)). Legal detriment means “‘giving up something which immediately prior thereto the promisee was privileged to retain, or doing or refraining from doing something which he was then privileged not to do, or not to refrain from doing.’” Graphic Arts Finishers, Inc., 255 N.E.2d at 795 (quoting Williston, Williston on Contracts § 102A (3d ed.1957)). Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 11 of 19 -8- Hinchey v. Nynex Corp., 144 F.3d 134, 142-43 (1st Cir. 1998) (alteration in original). Because the expired warrants had no value to Plaintiffs and imposed no legal obligation on HealthFusion, “plaintiffs’ characterization of the promise [for new warrants] as a contract fails as a matter of law because of lack of consideration.” Id. at 143. Sapta Global, Inc. v. Cilicorp, LLC, No. 13- 3698 (KM)(MAH), 2015 U.S. Dist. LEXIS 40186 (D.N.J. Mar. 30, 2015) is also instructive. In Cilicorp, the court denied, in part, a request for entry of a default judgment in a multi-faceted breach of contract case. In so ruling, the Court stated in pertinent part: The Memorandum of Understanding is in substance a modification to the Independent Contractor Agreement. To be enforceable, a modification to a contract must provide consideration to all parties. “[N]o contract is enforceable without the flow of consideration - both sides must get something out of the exchange. That premise applies equally to agreements to modify existing contracts as to new contracts.” Oscar v. Simeonidis, 352 N.J. Super. 476, 800 A.2d 271, 276 (N.J. App. Div. 2 2002) . . . . No such consideration is alleged or established here. Cilicorp (presumably) received some extension of its time to pay. Sapta, though, has not explained what consideration it received in return for that accommodation. Id. at *19-20 (alteration in original). Accordingly, the request for entry of a default judgment based on the parties’ purportedly binding Memorandum of Understanding was denied. Plaintiffs here likewise fail to identify any consideration HealthFusion received in return for its purported extension of the expired (or expiring) warrant agreement(s). Without such fundamental allegations, Plaintiffs’ claim for breach of contract cannot stand.6 6 Another glaring omission from the Amended Complaint is the expiration date of the allegedly extended warrants. Plaintiffs now state in paragraph 20 of the Amended Complaint that “HealthFusion . . . extended the expiration dates of [Plaintiffs’] warrants,” and then in paragraph 21 relate Dr. Lizerbram’s December 2012 statement that an extension “will issue.” But Plaintiff nowhere indicates what the new expiration date is on the allegedly re-issued warrants. Thus, there is no basis for believing that even the allegedly re-issued warrants can support a breach of contract claim (i.e., the newly issued warrants might also have expired and become worthless prior to the QSI transaction). Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 12 of 19 -9- 2. Plaintiffs’ Duplicative Breach of the Implied Covenant Claim Is Not an Independent Claim and Falls with the Demise of the First Count for Breach of Contract Plaintiffs’ second claim for breach of the implied covenant of good faith and fair dealing is based on the exact same alleged misconduct by Defendants and seeks the exact same remedies for the alleged breach - monetary damages and specific performance. Compare AC ¶¶ 37-48 (paragraphs supporting breach of contract claim), with id. ¶¶ 49-58 (nearly identical paragraphs supporting breach of the implied covenant claim). When there is such overlap between a breach of contract and breach of the implied covenant claim, the latter cannot stand, especially when the underlying contract claim is not viable. See Amcan Holdings, Inc. v. Can. Imperial Bank of Commerce, 70 A.D.3d 423 (NY App. Div. 2010). In Amcan, the court dismissed all breach-of- contract related claims for failure to allege breach of an actual agreement (as opposed to an agreement to agree subsequently). Id. at 426. But in so ruling, the Amcan court separately found that “[t]he claim that defendants breached the implied covenant of good faith and fair dealing was properly dismissed as duplicative of the breach-of-contract claim, as both claims arise from the same facts (Logan Advisors, LLC v. Patriarch Partners, LLC, 63 A.D.3d 440, 443 [(2009)] and seek the identical damages for each alleged breach (see Deer Park Enters., LLC v. Ail Sys., Inc., 57 A.D.3d 711, 712 [(2008)].” Id. The same reasoning compels dismissal of Plaintiffs’ second count for Breach of the Implied Covenant of Good Faith and Fair Dealing. This claim is duplicative of the breach of contract claim, which itself has no validity. B. The Count for Intentional Interference with Contractual Relations Fails The newly asserted third count for Intentional Interference with Contractual Relations fails for two separate reasons. First, the interference claim is dependent upon a viable underlying breach of contract claim. Because, as noted above, there is no viable contract claim asserted Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 13 of 19 -10- here, the interference claim necessarily fails. See Reeves v. Hanlon, 33 Cal. 4th 1140, 1148 (2004) (noting that the first element to establish a cause of action for intentional interference with contractual relations is “the existence of a valid contract between the plaintiff and a third party”); G.S. Enters., Inc. v. Falmouth Marine, Inc., 410 Mass. 262, 272 (1991) (stating that the first element a plaintiff must establish in an interference with contractual relations claim is that “he had a contract with a third party”). Second, the interference claim fails because of additional hornbook law principles; namely, (a) that a corporation acts through its officers and directors - see, e.g., Durand v. IDC Bellingham, L.L.C., 440 Mass. 45, 58 (2003) (“Corporations act through their authorized agents, and when a corporation's actions come into question, we attribute to the corporation the actions, words, and knowledge of its agents acting within their authority.”); People v. Pereira, 207 Cal. App. 3d 1057, 1077 (1989) (“Artificial entities such as corporations may act only through their agents” (citation omitted)), and (b) that a party cannot tortiously interfere with its own contract - see, e.g., Blackstone v. Cashman, 448 Mass. 255, 259 n.8 (2007) (a party to a contract cannot be held liable for intentional interference with that contract); Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 514 (1994) (“the tort cause of action for interference with contract does not lie against a party to the contract.”). Taken together, these principles establish the general rule that corporate officers and directors acting in that capacity cannot be liable for intentionally interfering with a contract entered into by that corporation. The rationale for such a rule is sound, as explained in as explained by the court in Asahi Kasei Pharma Corp. v. Actelion Ltd., 222 Cal. App. 4th 945, 960-61 (2013), when discussing Applied Equipment: [I]n Applied Equipment, supra, 7 Cal.4th 503, . . . the California Supreme Court held that a contracting party cannot be held liable in tort for conspiracy to interfere with its own contract. (Id. at pp. 507- 508.) The court noted that a line of authority from the Court of Appeal Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 14 of 19 -11- had held that “one contracting party, by use of a conspiracy theory, could impose liability on another for the tort of interference with contract.” (Id. at p. 510.) However, the Supreme Court rejected this authority “because: (1) it illogically expands the doctrine of civil conspiracy by imposing tort liability for an alleged wrong- interference with a contract-that the purported tortfeasor is legally incapable of committing; and (2) it obliterates vital and established distinctions between contract and tort theories of liability by effectively allowing the recovery of tort damages for an ordinary breach of contract. … [¶] … [¶] By its nature, tort liability arising from conspiracy presupposes that the coconspirator is legally capable of committing the tort, i.e., that he or she owes a duty to plaintiff recognized by law and is potentially subject to liability for breach of that duty.” (Id. at pp. 510-511.) The Applied Equipment court pointed out that “Applied's conspiracy theory is fundamentally irreconcilable with the law of conspiracy and the tort of interference with contract …” because “the tort cause of action for interference with contract does not lie against a party to the contract.” Id. at 514. Here, the interference claim is asserted against members of HealthFusion’s board of directors (AC ¶ 22) who are also officers of the Company. There is no indication that these individuals were acting in any capacity other than in their official capacities as HealthFusion agents - indeed, Plaintiffs allege that these defendants were acting in their capacity as Board members when allegedly authorizing the issuance of replacement warrants. Id. It defies credulity to suggest - and Plaintiffs do not so allege - that these same individuals were acting outside their corporate capacities in “caus[ing] HealthFusion and QSI to withhold payments due to Mr. Baker and Anasazi III Offshore pursuant to their extended warrants.” AC ¶ 36. Moreover, the only plausible way in which the individuals could have “caused” HealthFusion to withhold payments allegedly due to Plaintiffs is in their official capacity as officers and directors of HealthFusion. For these reasons, Plaintiffs third count for Intentional Interference with Contractual Relations is terminally defective. Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 15 of 19 -12- C. The Amended Complaint Should Be Dismissed Against QSI and the Individual Defendants Even if the Court were somehow to find that Plaintiffs have asserted a viable claim for breach of contract against HealthFusion - which Defendants respectfully submit should not occur - the Court should still dismiss QSI and the individual defendants from this contract-based action. This is so because, by Plaintiffs’ own admission, the warrant agreement(s) purportedly giving rise to their Complaint are between HealthFusion and Plaintiffs - not between any of the individual defendants and Plaintiffs and not between QSI and Plaintiffs. See AC ¶¶ 15-18 (alleging that “HealthFusion issued warrants” to Mr. Baker and his various affiliated entities); AC ¶ 22 (alleging that in November 2012, “HealthFusion issued [a] replacement warrant” to non-party Baker Securities); AC ¶¶ 38, 50 (“The warrants issued by HealthFusion to Plaintiffs . . . were enforceable contracts”). Basic contract law holds that a breach of contract action may be brought only against signatories to the agreement, unless there has been an assumption or assignment of the contractual duties to a non-signatory. See, e.g., Crabtree v. Tristar Auto. Grp., Inc., 776 F. Supp. 155, 166 (S.D.N.Y. 1991) (“It is hornbook law that a non-signatory to a contract cannot be named as a defendant in a breach of contract action unless it has thereafter assumed or been assigned the contract.”); Beacon Syracuse Assocs. v. City of Syracuse, 560 F. Supp. 188, 201 (N.D.N.Y. 1983) (“Only those who are parties to a contract may be held liable for a breach of that contract.”). Here, Plaintiffs’ own allegations state that the only signatories to the supposed warrant agreement(s) are HealthFusion and Plaintiffs. Moreover, there is no allegation - nor can there be - that any of the individual defendants assumed or otherwise were assigned HealthFusion’s rights and obligations under the purported warrant agreement(s) with Plaintiffs. Accordingly, the Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 16 of 19 -13- individual defendants - Sol Lizerbram, Jonathan Flam, and Seth Flam - should be summarily dismissed from this action. See, e.g., Hosack v. Utopian Wireless Corp., No. DKC 11-0420, 2011 U.S. Dist. LEXIS 48687, at *8 (D. Md. May 6, 2011) (dismissing breach of contract claim against all non-signatories to a stock transfer agreement, leaving only the Company signatory as a defendant to this claim, because “a person cannot be held liable under a contract to which he was not a party” (citation omitted)).7 V. CONCLUSION For all of the reasons described above, Defendants maintain that their motion to dismiss Plaintiffs’ Amended Complaint should be granted. Plaintiffs have stated no viable claim against any of the Defendants in this second complaint. Because Plaintiffs have already been afforded the opportunity to re-plead their case, and because fundamental defects remain which preclude any breach-of-contract based action - which is what Plaintiffs have sought in both their complaints - Defendants respectfully submit that the instant motion to dismiss should be granted without leave to amend. 7 Plaintiffs’ attempt to hold QSI liable for the purported HealthFusion warrant(s) appears to be based on the allegation in paragraph 23 of the Amended Complaint, which reads: “The warrants issued by HealthFusion to Plaintiffs state: ‘In case of any Organic Change, the successor or acquiring corporation (if other than Company) shall expressly assume the due and punctual observance and performance of each covenant and condition of this Warrant to be performed and observed by Company and all obligations and liabilities hereunder . . . .’” (Alteration in original). But this promise is purportedly contained in an agreement between Plaintiffs and HealthFusion (and not the actual acquirer). Thus, any failure by an acquirer to abide by this provision would result in a breach of HealthFusion’s supposed contractual obligation to Plaintiffs, and would not be a breach by QSI of any promise to Plaintiffs. Thus, QSI - a non-signatory to the purported warrants giving rise to this action - should also be dismissed as a defendant in this action. Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 17 of 19 -14- Respectfully submitted, Defendants HealthFusion, Inc., Quality Systems, Inc., Sol Lizerbram, Jonathan Flam and Seth Flam By their attorneys, Dated: January 12, 2017 /s/ Dylan J. Liddiard Dylan J. Liddiard, Admitted Pro Hac Vice Thomas J. Martin, Admitted Pro Hac Vice Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304 Telephone: (650) 493-9300 Facsimile: (650) 565-5100 Email: dliddiard@wsgr.com Email: tmartin@wsgr.com - and - Mark C. Solakian Wilson Sonsini Goodrich & Rosati, P.C. 28 State Street, 37th Floor Boston, MA 02109 Direct: (617) 598-7803 Email: msolakian@wsgr.com Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 18 of 19 -15- CERTIFICATE OF SERVICE I hereby certify that this document filed through the ECF system will be sent electronically to the registered participants as identified in the Notice of Electronic Filing (NEF) and paper copies will be sent to those indicated as non-registered participants on January 12, 2017. /s/ Dylan J. Liddiard Dylan J. Liddiard Case 1:16-cv-12058-ADB Document 20 Filed 01/12/17 Page 19 of 19 EXHIBIT A Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 1 of 20 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS CHRISTOPHER P. BAKER and ANASAZI PARTNERS III OFFSHORE FUND, LTD. Plaintiffs, v. HEALTHFUSION, INC., QUALITY SYSTEMS, INC., SOL LIEZERBRAM, JONATHAN FLAM, and SETH FLAM Defendants Civil Action No. 1:16-cv- 12058-ADB AMENDED COMPLAINT AND JURY DEMAND This is anPlaintiffs file this Amended Complaint and Jury Demand pursuant to Fed. R. Civ. P. 15(a)(1)(B). The captioned action in contractis to enforce an obligation to purchase warrants for shares of common stock warrants for the purchase of shares of stock in Defendant HealthFusion, Inc. Plaintiffs are holders of warrants that Defendants wrongfully declined to redeem. PARTIES Plaintiff Christopher P. Baker (“Mr. Baker”) is an individual residing in Newton,1. Massachusetts. Plaintiff Anasazi Partners III Offshore Fund, Ltd. (“Anasazi III Offshore” and,2. with Mr. Baker, the “Plaintiffs”) is organized under the laws of the British Virgin Islands. Its manager, C.P. Baker, LLC (“Baker LLC”), has a principal place of business in Massachusetts. Defendant HealthFusion, Inc. is a Delaware corporation with a principal place of3. business at 4075 Sorrento Valley Boulevard, San Diego, California. On information and belief, Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 2 of 20 prior to a merger in October 2015, HealthFusion, Inc.’s assets were transferred to HealthFusion Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 3 of 20 Holdings, Inc. For the purposes of this Complaint, these two entities are referred to collectively as “HealthFusion.” Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 4 of 20 Defendant Quality Systems, Inc. (“Quality SystemsQSI”) is a California4. corporation with a place of business at 18111 Von Karman Avenue, Suite 700, Irvine, California. Defendant Sol Liezerbram (“Dr. Liezerbram”) is an individual residing in Rancho5. Santa Fe, California. Defendant Jonathan Flam is an individual residing in San Diego, California.6. Defendant Seth Flam is an individual residing in San Diego, California.7. JURISDICTION AND VENUE This Court has subject matter jurisdiction of this action pursuant to 288. U.S.C. §§ 1332(a) because there is complete diversity of citizenship among the parties. Defendants are each subject to personal jurisdiction in this district because they9. entered into the contracts at issue with parties operating in Massachusetts and caused injury to Plaintiffs in Massachusetts through conduct, actions, and communications that took place in substantial part in Massachusetts. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 because a substantial10. part of the events or omissions giving rise to the claims asserted herein occurred in this district. FACTS Mr. Baker is the president of C.P. Baker Securities, Inc. (“Baker Securities”),11. Mr. Baker is the sole member of Baker LLC, a single-member limited liability12. company. Baker LLC is the manager of Plaintiff Anasazi III Offshore and of Anasazi13. Partners III, LLC. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 5 of 20 Anasazi III Offshore and of Anasazi Partners III, LLC are investment funds of14. substantially similar composition. At all relevant times, Anasazi Partners III, LLC was available Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 6 of 20 only to investors within the United States. Accordingly it is here called “Anasazi III Domestic.” Anasazi Partners III Offshore Fund, Ltd. was available only to investors outside the United States. Accordingly it here called “Anasazi III Offshore.” Beginning in approximately 2005, Mr. Baker, in his individual capacity, invested15. in HealthFusion. In connection with this investmenthis investments, HealthFusion issued warrants by which Mr. Baker, individually, was entitled to purchase 450,000 shares of common stock in HealthFusion. HealthFusion issued to Baker Securities warrants for 200,000 shares of common16. stock in HealthFusion. Baker Securities earned these warrants as a commission for services rendered to HealthFusion. Mr. Baker also caused Anasazi III Offshore to invest in HealthFusion. In17. connection with thissuch investment, HealthFusion issued warrants by which Anasazi III Offshore was entitled to purchase 187,500 shares of common stock in HealthFusion. Mr. Baker also caused Anasazi III Domestic to invest in HealthFusion. In18. connection with thissuch investment, HealthFusion issued warrants by which Anasazi III Domestic was entitled to purchase 187,500 shares of common stock in HealthFusion. On or about April 28, 2009, and at the request of SolDr. Liezerbram,19. HealthFusion’s chairman, Baker Securities transferred 60,244 of its 200,000 warrants to one Robert Beuret. Prior to expiration of the warrants described herein, Mr. Baker learned that the20. warrants of other investors had been amended so as to extend their expirations dates. Mr. Baker brought this to the attention of HealthFusion, primarily in communications with Dr. Liezerbram. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 7 of 20 In response to Mr. Baker’s request, HealthFusion similarly extended the expiration dates of the warrants described in paragraphs 15-19 above. 20. InOn November 20, 2012, SolDr. Liezerbram, HealthFusion’s chairman,21. communicated with Mr. Baker about the reissuance of warrants, effectively in order to extending the expiration dates of existing warrants. Mr. Liezerbram wrotewrote to Mr. Baker, “...the Warrant expires December 12, 2012, however by virtue of this e-mail I am confirming that a replacement Warrant with an extended date will be issued.” MrDr. Liezerbram concluded, “We need to extend all the Warrants that fit into your category at the same time. “All the Warrants” to which MrDr. Liezerbram referred included Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 8 of 20 HealthFusion’s warrants to Mr. Baker, Baker Securities, Anasazi III Offshore, and Anasazi III Domestic. 21. On or about November 23, 2012, HealthFusion issued a newreplacement22. warrant by which Baker Securities was entitled to purchase 139,756 shares of common stock in HealthFusion. This figure represented the original warrant for 200,000 shares less the 60,244 that Baker Securities had transferred to Robert Beuret. The issuance of this newreplacement warrant also extended the warrants’warrant’s expiration date. HealthFusion issued the newreplacement warrant to Baker Securities at the direction of its board of directors, which included Liezerbram, Seth Flam, and Jonathan Flam. 22. The warrants issued by HealthFusion to Plaintiffs state: “In case of any23. Organic Change, the successor or acquiring corporation (if other than Company) shall expressly assume the due and punctual observance and performance of each covenant and condition of this Warrant to be performed and observed by Company and all obligations and liabilities hereunder …....” 23. The warrants also instruct that: “Company shall not by any action, including,24. without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 9 of 20 action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment.” 24. The warrants additionally grant Plaintiffs the right to specific performance of25. the rights conferred therein. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 10 of 20 25. On October 30, 2015, HealthFusion entered into an Agreement and Plan of26. Merger (“Merger Agreement”) with Quality SystemsQSI and other parties. The Merger Agreement described a corporate merger pursuant to which HealthFusion was to be a surviving corporation with Quality SystemsQSI as its corporate parent (the “Merger”). 26. On November 12, 2015, HealthFusion issued to warrant holders a Warrant27. Notice and Consent (“Notice and Consent”). 27. The Notice and Consent stated in part as follows:28. At the Effective Time of the Merger (the “Effective Time”), each unexercised Company Warrant shall be cancelled and converted into the right to receive for each share of Company Common Stock subject to such Company Warrant, the sum of (i) (A) the Per Share Closing Merger Consideration Amount, minus (B) the exercise price of such Company Warrant (the “Closing Net Warrant Payment”), plus (ii) the Per Share Closing working Capital Adjustment Amount, if any, pursuant to the terms of Section 1.13 of the Merger Agreement, plus (iii) the Per Share Earnout Amount, if any, pursuant to the terms of Section 1.14 of the Merger Agreement, plus (iv) the Per Share Escrow Release Amount, if any, pursuant to the terms of Section 8.8 of the Merger Agreement, plus (v) the Per Share Expense Fund Distribution Amount, if any, pursuant to the terms of Section 8.2(b) of the Merger Agreement, (it being understood that, if the exercise price payable in respect of a share of Company Common Stock subject to any Company Warrant exceeds the sum Per Share Closing Merger Consideration Amount, the Per Share Closing Working Capital Adjustment Amount, the Per Share Earnout Amount, the Per Share Escrow Release Amount, and the Per Share Expense Fund Distribution Amount, then the amount Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 11 of 20 payable hereunder with respect to such Company Warranty shall be zero). Within three (3) Business Days after the Closing, Parent shall pay by wire transfer of immediately available funds to the Surviving Corporation and Parent shall cause the Surviving Corporation to pay to each of the holders of the Company Warrants, the applicable Closing Net Warrant Payment, if any, for each share underlying such holder’s Company Warrants less any required withholding of Taxes under applicable law. 28. Nearly identical language appears at Section 1.8(b) of the Merger Agreement.29. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 12 of 20 29. Mr. Baker, Baker Securities, Anasazi III Domestic, and Anasazi III Offshore30. each received a copy of the Notice and Consent. 30. Following the Merger, HealthFusion paid Baker Securities compensation31. for all of Baker Securities’ outstanding warrants, as extended. 31. Following the Merger, HealthFusion paid Anasazi III Domestic on all32. if its outstanding warrants, as extended. 32. Following the Merger, HealthFusion failed to pay Anasazi III Offshore for33. any of its outstanding warrants, as extended. Anasazi III Offshore is owed $214,076.96. 33. Following the Merger, HealthFusion paid Mr. Baker for some but not all34. of his outstanding warrants, as extended. Mr. Baker remains owed $99,903.15. 34. Many other warrant holders, whose warrants had been extended similarly to35. those of Mr. Baker, Baker Securities, Anasazi III Offshore, and Anasazi III Domestic, were paid in full for their warrants following the Merger. Sol Liezerbram, Jonathan Flam, and Seth Flam wrongfully caused HealthFusion36. and QSI to withhold payments due to Mr. Baker and Anasazi III Offshore pursuant to their extended warrants. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 13 of 20 COUNT 1 (Breach of Contract) 35. Plaintiffs incorporate the foregoing allegations as if restated herein.37. 36. The warrants issued by HealthFusion to Plaintiffs and the Merger38. Agreement were enforceable contracts. 37. The warrants issued by HealthFusion to Plaintiffs entitled Plaintiffs to39. purchase a defined number of HealthFusion shares. 38. The terms of the warrants issued by HealthFusion to Plaintiffs40. required Defendants to compensate Plaintiffs for the warrants in the event that HealthFusion was sold. 39. The terms of the warrants issued by HealthFusion to Plaintiffs also prohibited41. Defendants from taking any steps or actions to prevent Plaintiffs from exercising their rights pursuant to the warrants. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 14 of 20 40. By its words and actions, HealthFusion, in or around November 2012, agreed42. to extend and did extend eachthe expiration dates of the warrants held by Plaintiffs. 41. Following the Merger, and pursuant to Section 1.8(b) of the Merger43. Agreement and the Notice and Consent, Quality SystemsQSI was required to pay to HealthFusion and to cause HealthFusion to pay Plaintiffs for all of their outstanding warrants, as extended. 42. Following the Merger, Mr. Baker was paid for some but not all of his44. outstanding warrants, as extended. Mr. Baker remains owed $99,903.15. 43. Following the Merger, Anasazi III Offshore was not paid for any45. of its outstanding warrants, as extended. Anasazi III Offshore is owed $214,076.96. 44. Defendants have breached their contractual obligations to Plaintiffs, including46. but not limited to the obligation to redeem the warrants and the prohibition on impairing Plaintiffs’ ability to enforce their rights pursuant to the warrants. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 15 of 20 45. As a result, Plaintiffs have suffered damages in the form of the amounts owed47. and unpaid by Defendants and additional consequential damages. 46. Plaintiffs are also entitled, in the alternative, to specific performance of48. each warrant issued by HealthFusion to Defendants. COUNT 2 (Breach of the Implied Covenant of Good Faith and Fair Dealing) 47. Plaintiffs incorporate the foregoing allegations as if restated herein.49. 48. The warrants issued by HealthFusion to Plaintiffs and the Merger50. Agreement were enforceable contracts. 49. The contracts between HealthFusion and Plaintiffs each contained an51. implied covenant of good faith and fair dealing. 50. By its words and actions, HealthFusion agreed to extend and did extend52. eachthe expiration dates of the warrants held by Plaintiffs in or around November 2012. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 16 of 20 51. Following the Merger, and pursuant to Section 1.8(b) of the Merger53. Agreement and the Notice and Consent, Quality SystemsQSI was required to pay to HealthFusion and to cause HealthFusion to pay Plaintiffs for all of their outstanding warrants, as extended. 52. Following the Merger, Mr. Baker was paid for some but not all of his54. outstanding warrants, as extended. Mr. Baker remains owed $99,903.15. 53. Following the Merger, Anasazi III Offshore was not paid for any of55. its outstanding warrants, as extended. Anasazi III Offshore is owed $214,076.96. 54. Defendants have breached the implied covenant of good faith and fair dealing56. that was included in Defendants’ contracts with Plaintiffs, by such acts as, without limitation, refusing to perform their duties pursuant to the contracts and refusing to honor HealthFusion’s 2012 extension of each warrant. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 17 of 20 55. These and other actions by Defendants have prevented Plaintiffs from57. receiving the benefit of the contracts agreed to by Plaintiffs and HealthFusion. 56. As a result, Plaintiffs have suffered damages in the form of the amounts owed58. and unpaid by Defendants and additional consequential damages. COUNT 3 (Intentional Interference with Contractual Relations) Plaintiffs incorporate the foregoing allegations as if restated herein.59. The warrants issued to Plaintiffs and the Merger Agreement were enforceable60. contracts. Sol Liezerbram, Jonathan Flam, and Seth Flam intentionally caused and induced61. HealthFusion and QSI not to pay Plaintiffs on their warrants. The conduct of Sol Liezerbram, Jonathan Flam, and Seth Flam constitutes62. intentional interference with Plaintiffs’ rights under the warrants and the Merger Agreement. As a result, Plaintiffs have suffered damages in the form of the amounts owed and63. unpaid by Defendants and additional consequential damages. PRAYERS FOR RELIEF WHEREFORE, Plaintiffs hereby request that this Court: Award Plaintiffs their actual damages, in an amount to be determined at trial, sustained asA. a result of Defendants’ breach of their contracts with, and duties to, Plaintiffs; or In the alternative, award Plaintiffs specific performance of each of the warrants issued byB. HealthFusion to Plaintiffs; and Award Plaintiffs such other and further relief to which they may be entitled.C. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 18 of 20 JURY DEMAND PLAINTIFFS DEMAND A TRIAL BY JURY ON ALL ISSUES SO TRIABLE. Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 19 of 20 Summary report: Litéra® Change-Pro TDC 10.0.0.21 Document comparison done on 12/29/2016 3:08:28 PM Style name: Default Style Intelligent Table Comparison: Active Original filename: complaint.doc Modified filename: 2016-12-29 Dkt 19 Amended Complaint.doc Changes: Add 102 Delete 84 Move From 4 Move To 4 Table Insert 0 Table Delete 0 Table moves to 0 Table moves from 0 Embedded Graphics (Visio, ChemDraw, Images etc.) 0 Embedded Excel 0 Format changes 0 Total Changes: 194 Case 1:16-cv-12058-ADB Document 20-1 Filed 01/12/17 Page 20 of 20 EXHIBIT B Case 1:16-cv-12058-ADB Document 20-2 Filed 01/12/17 Page 1 of 5 1 Case 1:16-cv-12058-ADB Document 20-2 Filed 01/12/17 Page 2 of 5 2 Case 1:16-cv-12058-ADB Document 20-2 Filed 01/12/17 Page 3 of 5 3 Case 1:16-cv-12058-ADB Document 20-2 Filed 01/12/17 Page 4 of 5 4 Case 1:16-cv-12058-ADB Document 20-2 Filed 01/12/17 Page 5 of 5 -1- UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS CHRISTOPHER P. BAKER, and ANASAZI PARTNERS III OFFSHORE FUND, LTD. Plaintiffs, v. HEALTHFUSION, INC., QUALITY SYSTEMS, INC., SOL LIEZERBRAM, JONATHAN FLAM, and SETH FLAM Defendants. Civil Action No.: 1:16-CV-12058-ADB JURY TRIAL DEMANDED [PROPOSED] ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS On January 12, 2017, Defendants HealthFusion, Inc. (“HealthFusion”), Quality Systems, Inc. (“QSI”), Sol Lizerbram, Jonathan Flam and Seth Flam (collectively, “Defendants”) filed their Motion to Dismiss the Amended Complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs submitted opposition papers to the motion, and Defendants filed a reply. The Court, having considered the submissions supporting and opposing the motion, and good cause appearing therefrom, hereby orders as follows: 1. Defendants’ Motion to Dismiss is GRANTED; 2. Because the Amended Complaint is Plaintiffs’ second attempt to allege viable claims against Defendants, and because the fundamental defects that rendered Plaintiffs’ original Complaint defective - namely, the failure to specify the terms of the warrant agreement(s) at issue, including the expiration date(s) of those agreement(s) and the consideration exchanged supporting same - remain in Plaintiffs’ Amended Complaint, Defendants’ Motion to Dismiss is GRANTED WITHOUT LEAVE TO AMEND. Case 1:16-cv-12058-ADB Document 20-3 Filed 01/12/17 Page 1 of 2 -2- IT IS SO ORDERED. Dated: February __, 2017 United States District Judge Case 1:16-cv-12058-ADB Document 20-3 Filed 01/12/17 Page 2 of 2
