Clarity Research And Consulting, Llc v. Omniwest, Llc et al

MOTION to Dismiss for Lack of Jurisdiction Pursuant to Rule 12

W.D. Tex.March 10, 2017

1 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION CLARITY RESEARCH AND CONSULTING LLC, § § § Plaintiff, § § v. § CIVIL NO. 1:17-CV-00203-SS § OMNIWEST, LLC, MARC JABLONSKI, SCOTT YOST, AND EMIR MUHOVIC, § § § § Defendants. § DEFENDANT EMIR MUHOVIC’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION PURSUANT TO RULE 12(B)(2) TO THE HONORABLE DISTRICT JUDGE SAMUEL SPARKS: COMES NOW, Defendant Emir Muhovic (“Muhovic”) and files this Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Rule 12(b)(2) and respectfully shows the following: I. EXECUTIVE SUMMARY Plaintiff Clarity Research and Consulting LLC (“Plaintiff”) sued Muhovic alleging claims for breach of contract, misappropriation of trade secrets, tortious interference, business disparagement, and conspiracy. The allegations stem from certain subcontractor agreements (the “Agreements”) which Plaintiff alleges creates jurisdiction against Muhovic because the Agreements “were performable, at least in part, in Texas.” Yet Muhovic was not a party to the Agreements. Further, Plaintiff has failed to demonstrate any aspect of the Agreements that was performable in Texas, nor has it alleged that Muhovic directed any tortious conduct toward the state of Texas. As a Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 1 of 15 2 result, exercising jurisdiction against Muhovic would offend traditional notions of fair play and substantial justice. II. FACTUAL AND PROCEDURAL BACKGROUND Muhovic is the President of 360 Wellness, LLC (“360 Wellness”). See Declaration of Emir Muhovic (“Muhovic Decl.”), attached as Exhibit 1 hereto and incorporated by reference, at ¶ 2. Neither 360 Wellness nor Muhovic are residents of Texas. Id., ¶¶ 2, 4. 360 Wellness is a Georgia Limited Liability Company and Muhovic is a resident of Georgia. Id. Plaintiff does not allege that Muhovic or 360 Wellness conducts business in Texas, and to do so would be incorrect: Muhovic does not conduct regular or systematic business in Texas. Id. ¶¶ 816. Rather, Plaintiff alleges that jurisdiction is proper against Muhovic because he “entered into contracts with Clarity Research that were performable, at least in part, in Texas . . . .” See Plaintiff’s Original Petition (“Petition”), ¶ 10. However, there exists no contract between Muhovic and Plaintiff, and Muhovic has never signed a contract with Plaintiff in any individual capacity. Exhibit 1, ¶ 5 (Muhovic Decl.). Instead, the Agreements at issue in this lawsuit were agreements by and between Plaintiff and 360 Wellness, LLC – not Muhovic, individually. Id., ¶ 5 and Tab A attached thereto. Furthermore, neither 360 Wellness nor Muhovic have the necessary minimum contacts required to establish personal jurisdiction for the claims being brought by Plaintiff. In fact, 360 Wellness and Muhovic have no contacts with the State of Texas. Id. ¶¶815. Muhovic does not own property in Texas and does not conduct any regular business in Texas—whether individually or under an entity, such as 360 Wellness. Id. ¶ 810. Muhovic has no employees, agents, assets, or offices in Texas. Id. ¶¶ 9, 13. Muhovic does not maintain a registered agent for service of process in Texas. Id. ¶ 14. Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 2 of 15 3 Further, Muhovic does not advertise or solicit business in Texas. Id. ¶ 10. Muhovic does not even maintain a mailing address or phone number in Texas and has never been a litigant in the state of Texas prior to this case. Id. ¶¶ 9, 12, 16. 360 Wellness is a Georgia limited liability company formed by Muhovic for the purpose of providing consulting services. Id. ¶ 2. 360 Wellness is not an entity formed under the laws of Texas nor is it registered to do business in Texas. Id. ¶¶ 2, 8. 360 Wellness has no employees, agents, assets, or offices in Texas. Id. ¶ 13. 360 Wellness does not maintain a registered agent for service of process in Texas. Id. ¶ 14. Further, 360 Wellness does not advertise or solicit business in Texas, does not own property in Texas, and does not conduct any regular business in Texas. Id. ¶¶ 1012, 14. Finally, the sole basis for jurisdiction against Muhovic alleged in the Petition is that he “entered into contracts with Clarity Research that were performable, at least in part, in Texas and specified Travis County, Texas as the mandatory venue.” Petition, ¶ 10. However, Muhovic never signed any contract, in his individual capacity, with Clarity Research. Exhibit 1, ¶ 5 (Muhovic Decl.). Indeed, the only task under the Agreements performed by Muhovic on behalf of 360 Wellness was attending a 20- minute online training session that Muhovic completed from his residence in Georgia. Id. ¶ 7. III. ARGUMENTS AND AUTHORITIES Muhovic is not a resident of Texas. A court cannot exercise personal jurisdiction over a non-resident defendant unless that exercise is consistent with due process. Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945); Cent. Freight Lines, Inc. v. A.P.A. Transp. Corp., 322 F.3d 376, 380 (5th Cir. 2003). Exercising personal jurisdiction over a non-resident defendant is consistent with constitutional due process only when “(1) Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 3 of 15 4 that defendant has purposefully availed himself of the benefits and protections of the forum state by establishing ‘minimum contacts’ with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend traditional notions of fair play and substantial justice.” Int’l Shoe, 326 U.S. at 319; Cent. Freight, 322 F.3d at 380. In other words, this Court lacks jurisdiction over a nonresident defendant unless the plaintiff demonstrates the nonresident defendant has purposefully established “minimum contacts” with Texas and the court’s exercise of jurisdiction over the defendant comports with “fair play and substantial justice.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-76 (1985). The party seeking to invoke the court’s jurisdiction must make a prima facie showing of the facts upon which jurisdiction may be based. Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1160-61 (5th Cir. 1983). Because Defendant Muhovic has challenged personal jurisdiction, Plaintiff bears the burden of establishing the Court’s jurisdiction. See Quick Tech., Inc. v. Sage Group PLC, 313 F.2d 338, 343 (5th Cir. 2002). Furthermore, the plaintiff bears the burden of pleading sufficient allegations showing that personal jurisdiction is proper as to each claim against a defendant. Amoco Chemical Co. v. Tex Tin Corp., 925 F. Supp. 1192, 1199 (S.D. Tex. 1996). As evidenced from Plaintiff’s Original Petition, Plaintiff has not met its burden to make a prima facie case to establish general or specific jurisdiction over Muhovic. Nor can it establish that the exercise of jurisdiction over Muhovic will comport with traditional notions of fair play and substantial justice. A. The Court Lacks General Jurisdiction Over Muhovic. A non-resident defendant must have minimum contacts with the forum state to support jurisdiction. Contacts, depending upon their quality and quantity, may warrant Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 4 of 15 5 the exercise of either “specific” or “general” jurisdiction. Mink v. AAAA Development LLC, 190 F.3d 333, 336 (5th Cir. 1999). When a non-resident defendant has “purposefully directed its activities at the forum state and the litigation results from alleged injuries that arise out of or relate to those activities,” the defendant’s contacts are sufficient to support the exercise of specific jurisdiction over that defendant. See Burger King, 471 U.S. at 472 (internal quotation marks omitted). General jurisdiction may be asserted when a defendant’s contacts with the forum state are substantial and “continuous and systematic” but unrelated to the instant cause of action. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). To establish continuous and systematic contacts, there must be a showing of substantial activities in the forum state, and the defendant’s contacts must amount to “a general business presence.” Bearry v. Beech Aircraft Corp., 818 F.2d 370, 375-76 (5th Cir. 1987). Even extensive contacts with the forum will be insufficient to support general jurisdiction if the contacts do not amount to a general business presence in the forum. See Hydrokinetics, Inc. v. Alaska Mech., Inc., 700 F.2d 1026, 1029 (5th Cir. 1983), cert. denied, 466 U.S. 962 (1984) (court in Texas lacked jurisdiction even though there was “extensive communication” between Texas and Alaska, payments were made in Texas, officers of the defendant twice traveled to Texas, and contract at issue was drafted in Texas). Plaintiff cannot establish either general or specific jurisdiction because, as the evidence demonstrates, Muhovic has had no substantive contacts with Texas at all. The general jurisdiction analysis cannot be satisfied in this case because general jurisdiction can be asserted only where a defendant’s contacts with the forum are Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 5 of 15 6 substantial, continuous, and systematic. Helicopteros, 466 U.S. at 414 n. 8. Muhovic has never resided in Texas, never conducted any personal business in Texas, and never contracted to do business in Texas. To the extent that Muhovic has had any contact with Texas, such contact has been either tangential, insubstantial, and sporadic. Muhovic’s contacts with Texas have certainly not been continuous, substantial, or systematic, and are therefore insufficient to establish general jurisdiction. Accordingly, the Court may not exercise general jurisdiction over the Muhovic. See Helicopteros, 466 U.S. at 414 n.8. B. The Court Lacks Specific Jurisdiction Over Muhovic. Muhovic is not subject to the Court’s specific jurisdiction, either. A court may exercise specific jurisdiction where a defendant has purposefully directed its activities to the forum state, and the litigation arises out of or relates to those activities. Burger King, 471 U.S. at 472. Here, Muhovic has not purposefully directed his activities to Texas such that the exercise of specific jurisdiction is appropriate, and he has no contacts with Texas from which this dispute arises or relates. Nor does Plaintiff allege Muhovic directed any activities to Texas. Additionally, the forum selection clause in favor of Texas is insufficient to warrant the exercise of specific jurisdiction over Muhovic. 1. Muhovic Lacks Minimum Contacts With Texas. As noted above, Plaintiff’s Original Petition fails to set forth any basis for concluding that Muhovic had any contact, much less minimum contacts that would satisfy the due process inquiry, with the state of Texas. Admittedly, Muhovic signed agreements with Plaintiff on behalf of a corporate entity. However, “merely contracting with a resident of a forum state does not establish minimum contacts.” Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 6 of 15 7 Moncreif Oil Int’l Inc. v. OAO Gazprom, 481 F.3d 309, 311 (5th Cir. 2007); see also, Rad v. Bragg, No. A-14-CA-1074, 2015 U.S. Dist. LEXIS 184330, at *6 (W.D. Tex. May 8, 2015) (SPARKS, J.). Moreover, communications related to forming or carrying out a contract are also insufficient to establish minimum contacts. Bragg, 2015 U.S. Dist. LEXIS 184330, at *6 (citing McFadin v. Gerber, 587 F.3d 753, 760 (5th Cir. 2009). “Jurisdiction must not be based on the fortuity of one party residing in the forum state.” Id. Muhovic has had no contacts with Texas. Muhovic does not reside in Texas, nor has he conducted business in Texas. Plaintiff has not alleged any specific action which Muhovic has engaged in within the State of Texas or directed toward the State of Texas. There is no specific jurisdiction over Muhovic because, as Plaintiff’s pleading bears out, he has not had any contact with Texas in his individual capacity. Moreover, Muhovic’s contacts with Texas as an officer, director, or authorized representative of a separate legal entity do not subject him to personal jurisdiction in Texas. Jurisdiction over an individual cannot be predicated on the exercise of jurisdiction over a corporation. Stuart v. Spademan, 772 F.2d 1185, 1196 (5th Cir. 1985). Muhovic’s contacts with Texas in a representative capacity are not his contracts, but that of the separate legal entity. Id. Plaintiff cannot, therefore, rely upon any contact Muhovic has had with Texas in a representative capacity to establish that Muhovic has specific minimum contacts with Texas. See id. (“[P]laintiffs have not demonstrated that [the corporation] is but a facade for [the individual defendant’s] interests and activities to justify attributing [the corporation’s] contacts with Texas to [the individual] for jurisdictional purposes.”); see also, Cantwell Family Trust v. Hyten, No. A-15-CA-414, 2015 U.S. Dist. LEXIS 116795 (W.D. Tex. Sept. 2, 2015). Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 7 of 15 8 2. The Forum-Selection Clause Does Not Support Personal Jurisdiction. As established above, Muhovic’s contacts are insufficient to establish personal jurisdiction in Texas. As such, the only remaining argument to support personal jurisdiction over Muhovic must rely on enforcement of a forum-selection clause found within the Agreements. Yet this provision is likewise insufficient to confer personal jurisdiction because (1) Muhovic is not a party to the Agreements and did not agree to the terms of the forum-selection clause; and (2) Plaintiff’s tort claims are not within the scope of the forum-selection clause. a. Muhovic is not bound by the forum-selection clause. As a general rule, a party who signs a contract with a forum-selection clause has either consented to personal jurisdiction or waived the requirements for personal jurisdiction in that forum. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985); see also Kevlin Servs., Inc. v. Lexington State Bank, 46 F.3d 13, 15 (5th Cir. 1995). But in this case, Muhovic is not a party to the Agreements. Exhibit 1, ¶ 5 (Muhovic Decl.). The Agreements were agreements entered into by Plaintiff and 360 Wellness, LLC—not Muhovic, individually. Muhovic, in his individual capacity (the capacity in which he has been sued) did not consent to personal jurisdiction in Texas and did not waive the requirements for personal jurisdiction in this forum. Although “[o]rdinary principles of contract and agency law may be called upon to bind a non-signatory to an agreement whose terms have not clearly done so,” these principles do not apply here. See Sapic v. Gov’t of Turkm., 345 F.3d 347, 356 (5th Cir. 2003). In a line of cases considering the enforceability of a contractual arbitration Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 8 of 15 9 clause to a non-signatory, the Fifth Circuit has recognized six theories for binding a non- signatory: (a) incorporation by references; (b) assumption; (c) agency; (d) veil-piercing / alter ago; (e) estoppel; and (f) third party beneficiary theory. Id. Plaintiff has not pled any facts sufficient to support any of these theories. Moreover, the mere fact that Muhovic signed the agreement on behalf of 360 Wellness does not obligate him in his individual capacity. In Reliant Pro Rehab, LLC v. Atkins, Judge Lynn of the Northern District of Texas held that the plaintiff failed to show the forum selection clause applied to non-signatories under any of the above-mentioned theories, and therefore dismissed the non-signatory for lack of personal jurisdiction. No. 3:16-CV-00920, 2016 U.S. Dist. LEXIS 163865 (N.D. Tex. Nov. 28, 2016). In that opinion, Judge Lynn wrote, “Knowledge of a forum selection clause is not one of the theories found by the Fifth Circuit as a basis to bind a non-signatory to a contract, and Plaintiff cites no case law to support binding a non-signatory to a contract based upon mere knowledge of a clause contained within that contract.” Id.; see also Smith v. Matias, No. 02-39553, 2007 Bankr. LEXIS 3122, at *28 (S.D. Tex. Sept. 11 2007) (“The Trustee has not met his burden for establishing personal jurisdiction over Grupo, Palatina and Flamina. These Defendants did not sign a loan document consenting to Texas jurisdiction or take other action that reasonably subjects them to being haled into a United States Court.”). Similarly, Muhovic should not be subject to jurisdiction simply because he was closely involved with the agreements at issue. The Fifth Circuit has rejected an “intertwined claims” theory of equitable estoppel when a signatory plaintiff attempts to enforce an arbitration or forum-selection clause against a non-signatory defendant. See Sapic, 345 F.3d at 361. The fact that Plaintiff’s claims against Muhovic may be intertwined with, and dependent upon the Agreements is not enough to afford Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 9 of 15 10 jurisdiction against a non-signatory. Id. Put simply, Muhovic is not a party to the forum-selection clause and such provision cannot be used to establish personal jurisdiction. b. Plaintiff’s claims are outside of the scope of the forum- selection clause. Even if the forum-selection clause was enforceable against Muhovic in his individual capacity, all but one of Plaintiff’s claims against Muhovic fall outside the scope of that provision. That sole claim—breach of contract—relates only to 360 Wellness, the signatory to the Agreements. In addition to breach of contract, Plaintiff asserts tort claims for misappropriation of trade secrets, tortious interference with contracts, tortious interference with prospective business relationships, business disparagement, and conspiracy. Where, as here, a plaintiff makes allegations sounding in both contract and tort, the court must examine both types of claims to determine whether they are governed by the forum selection clause. Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d 216, 222 (5th Cir. 1998). A tort claim falls within the scope of a contractual forum selection clause only when the interpretation of the contract affects the resolution of the claim. Pinnacle Interior Elements, Ltd. v. Panalpina, Inc., No. 3:09-CV-0430-G, 2010 U.S. Dist. LEXIS 11067, at *5 (N.D. Tex. Feb. 9, 2010) (also holding that whether a claim falls within the scope of a forum selection clause is a question of federal law); see also Psarros v. Avior Shipping, Inc., 192 F. Supp. 2d 751, 754 (S.D. Tex. 2002). Whether a forum selection clause encompasses other claims depends principally on how broadly the clause is worded. JetPay Merchant Servs., LLC v. Merrick Bank Corp., No. 3:13-cv-3101, 2014 U.S. Dist. LEXIS 26231, at *8 (N.D. Tex. Feb. 28, 2014). Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 10 of 15 11 In Pinnacle, Judge Fish explained the difference between narrow and broad forum selection clauses as follows: The language of the forum-selection clause is particularly important. Clauses that extend to all disputes that “relate to” or “are connected with” the contract are construed broadly, while clauses that cover disputes “arising out of” or over “the implementation and interpretation of” the contract are construed narrowly. Courts also look to the operative facts that underlie the alleged causes of action: “If the substance of the plaintiff’s claims, stripped of their labels, does not fall within the scope of the forum-selection clause, the clause cannot apply.” Pinnacle, 2010 U.S. Dist LEXIS 11067, at *16 (citing Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1067 (5th Cir. 1998)); see also MaxEn Capital, LLC v. Sutherland, No. H-08-3590, 2009 WL 936895, at *6-7 (S.D. Tex. Apr. 3, 2009) (recognizing a distinct difference between broad and narrow forum selection clauses). The forum selection clause here applies only to litigation “under this agreement.” It does not apply to litigation related to the agreement. It does not apply to litigation connected to the agreement. Under Judge Fish’s analysis—“relate to” clauses are construed broadly, while “arise under” clauses are construed narrowly—the forum selection clause in the Agreements is narrowly tailored. See also JetPay, 2014 U.S. Dist. LEXIS 26231, at *8 (“Forum selection clauses that cover disputes ‘arising from’ an agreement are viewed as relatively narrow.”). Against that framework, none of the tort claims asserted by Plaintiff in this case involve an interpretation of the Agreements, nor do any of the elements of those claims arise “under” the Agreements. Plaintiff can prove and prevail on all of its tort claims against Muhovic without reference to, or interpretation of, the Agreements. Plaintiff supervises and coordinates the development of research and clinical trial studies, and Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 11 of 15 12 the Agreements obligated 360 Wellness, LLC to “use its best efforts in promoting, developing, and marketing the Studies to physicians.” Plaintiff’s tort claims center around the allegation that “Defendants, acting in concert with one another, have systematically set out to destroy the business reputation and goodwill of [Plaintiff].” Petition, ¶ 28. This conduct is separate and distinct from any obligation, responsibility, or representation within the Agreements. Because the forum selection clause is narrowly limited by the “under this agreement” language, it necessarily does not apply to the claims in this case against Muhovic, even if the alleged torts were committed during the course of the contract. See Psarros v. Avior Shipping, Inc., 192 F. Supp. 2d 751, 754 (S.D. Tex. 2002) (“When a forum selection clause is limited to matters of contract interpretation or enforcement along, it is inapplicable to litigation arising from torts committed in the course of the contractual relationship.”); Gullion v. JLG ServicePlus, Inc., No. H-06-1015, 2007 U.S. Dist. LEXIS 6038, *23 (S.D. Tex. Jan. 29, 2007) (“Plaintiff’s claims are broader than the [agreement’s] forum selection clause, which is limited to ‘action[s] commenced hereunder,’”). None of the asserted tort claims against Muhovic requires any reference to, or seeks to enforce any rights arising from, the Agreements; therefore, the forum selection clauses do not apply to the asserted claims. Plaintiff already seeks to expand the enforcement of the forum-selection clause to parties who did not agree to its terms; Plaintiff should not be allowed to expand the substantive scope of the clause as well. C. The Fairness Factors Preclude the Exercise of Personal Jurisdiction. Even if Muhovic had sufficient contacts with Texas to allow the Court to proceed with the due process inquiry, an exercise of jurisdiction over Muhovic in Texas would offend the traditional notions of fair play and substantial justice upon which the federal Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 12 of 15 13 jurisdictional rules are based. See International Shoe, 326 U.S. at 316. This inquiry requires the consideration of several factors, known as “fairness factors,” namely: (1) the burden upon the non-resident defendant; (2) the interests of the forum state; (3) the plaintiff’s interests in securing relief; (4) the interstate judicial system’s interests in obtaining the most efficient resolution of controversies; and (5) the shared interests of the several States in furthering fundamental substantive social policies. See Burger King, 471 U.S. at 475. Here, the fairness factors do not weigh in favor of maintaining a suit over Muhovic in this district. 1. Undue Burden Requiring Muhovic to defend himself in a distant forum of which he is not resident, does not do business, and has not consistently or frequently visited would impose a significant burden on him. Muhovic will be forced to expend substantial time and effort traveling between Georgia and Texas in addition to imposing a considerable financial burden. 2. Lack Of Texas Interest Texas has no interest in litigating Plaintiff’s claims against Muhovic. As the evidence shows, Muhovic is a Georgia resident with no substantive contacts with Texas. While this may be, in part, a contractual dispute between a Texas entity and residents of other states, there are no alleged facts that it involves any other Texas parties, property located in Texas, or even acts or omissions that took place in the state of Texas or which would impact citizens of the state of Texas. 3. Securing Relief Maintaining a suit over Muhovic in this forum is not necessary for Plaintiff to secure relief. Muhovic is subject to personal jurisdiction in his home state of Georgia Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 13 of 15 14 and 360 Wellness is likewise subject to jurisdiction in Georgia. This suit for breach of contract and related torts could be easily maintained in Georgia as here. 4. Efficient Resolution Requiring Muhovic to defend himself in Texas will not serve the interstate judicial system’s interest in obtaining efficient resolution of this dispute. Again, a suit for contractual claims and related torts asserted against nonresident defendants is not the most efficient use of this Court’s judicial resources. Clearly then, this dispute could be just as efficiently resolved in another forum. 5. Shared Interests In Fundamental Social Policies This lawsuit does not present the Court with a question of fundamental social policy. This is a routine contractual and commercial business dispute. IV. CONCLUSION For all of the above reasons, maintaining a suit over Muhovic, who has no contacts with Texas, would offend traditional notions of fair play and substantial justice. WHEREFORE, Defendant Emir Muhovic prays the Court to dismiss this action pursuant to Federal Rule of Civil Procedure 12(b)(2), and for such other and further relief to which he shows himself justly entitled to receive. Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 14 of 15 15 Respectfully submitted, JACKSON WALKER L.L.P. By: /s/ Christopher R. Mugica Christopher Mugica State Bar No. 24027554 cmugica@jw.com Scott W. Weatherford State Bar No. 24079554 sweatherford@jw.com 100 Congress Avenue, Suite 1100 Austin, Texas 78701 (512) 236-2000 Telephone (512) 236-2002 Facsimile ATTORNEYS FOR DEFENDANT EMIR MUHOVIC CERTIFICATE OF SERVICE This is to certify that on this 10th day of March 2017 a true and correct copy of the foregoing document was electronically filed with the Clerk of the Court using the CM/ECF system which will send notification of such filing to all counsel of record. /s/ Christopher R. Mugica Christopher R. Mugica 17943574v.1 Case 1:17-cv-00203-SS Document 10 Filed 03/10/17 Page 15 of 15 Exhibit 1 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 1 of 28 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION CLARITY RESEARCH AND CONSULTING LLC, Plaintiff, v. 01\INIWEST,LLC,l\fARC JABLONSKI, SCOTT YOST, AND EMIR MUHOVIC, Defendants. § § § § § § CIVIL NO. 1:17-CV-00203-SS § § § § § § DECLARATION OF EMIR MUHOVIC 1. My name is EMIR MUHOVIC. I am over the age of twenty-one (21) years. I am of sound mind and capable of making this Declaration. My date of birth is March 21, 1977, and my address is 6066 Farmwood Way SE, Mableton, Georgia 30126. 2. I am currently an individual Defendant in this matter, and submit this Declaration in Support of my Motion to Dismiss for Lack of Personal Jurisdiction. I am also President of 360 Wellness, LLC ("360 Wellness"), a Georgia Limited Liability Company. Based on my responsibilities and duties as President of 360 Wellness, information that I have obtained in such capacity, and review of the business records of 360 Wellness, which are kept in the ordinary course of its business, I have personal knowledge of the matters set forth herein. All of the facts stated in this Declaration are true and correct. 3. Based upon a review of Plaintiffs Original Petition ("Petition"), Plaintiffs claims center around certain agreements between Plaintiff and 360 Wellness. The Petition alleges that I "entered into contracts with Plaintiff that were performable, at DECLARATION OF EMIR MUHOVIC 1 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 2 of 28 least in part, in Texas and specified Travis County, Texas as the mandatory venue." Petition, '1110. The Petition also claims that I "engaged in conduct designed to disrupt the business of [Plaintiff] by providing false information to third parties about [Plaintiffs] business." Id. '1118. 4. I am a resident of the State of Georgia. I reside at my permanent address of 6066 Farmwood Way SE, Mableton, Georgia 30126, and that is where I intend to reside indefinitely. I do not own any other residences. I am not domiciled in the State of Texas. 5. In May 2016, 360 Wellness entered into a Subcontractor Master Development Services Agreement with Plaintiff (the "Agreement").' I did not travel to Texas to negotiate the terms of the Agreement. Plaintiff emailed me a copy of the Agreement, and I received the Agreement via email in Georgia, while I was a resident of Georgia. I then executed the contract in Georgia in my capacity as President of 360 Wellness. I did not enter into any agreements with Plaintiff in my individual capacity. 6. The Agreement provides that 360 Wellness would perform consulting services that assist with the promotion, development and marketing of certain research, study, and clinical trial services managed by Plaintiff for various health care provider customers ("Clients"). All tasks to be performed by 360 Wellness - or by me on behalf of 360 Wellness - would have been done remotely from my computer in Atlanta Georgia. 7. The only activity I performed under the Agreement was attending a 20- minute Web-Ex training session that took place on June 2, 2016 at 9:00 a.m. This was 1 A true and correct copy of the Agreement is attached hereto as Exhibit A. DECLARATION OF EMIR MUHOVIC 2 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 3 of 28 an online training that I completed from my residence in Georgia. I did not contact any Clients on behalf of Plaintiff. 8. Neither 360 Wellness nor I own any property, residential or otherwise, in the State of Texas, and neither 360 Wellness nor I pay any property taxes in the State of Texas. 9. Neither 360 Wellness nor I have an office in Texas or any phone, internet, or cable accounts in Texas. 10. Neither 360 Wellness nor I advertise in Texas or solicit clients in Texas. 11. Other than with Plaintiff, 360 Wellness has not contracted with any individual or entity located in Texas. I have not personally contracted with any individual or entity located in Texas. 12. Neither 360 Wellness nor I have a mailing address in Texas. 13. Neither 360 Wellness nor I maintain any bank accounts in Texas. 360 Wellness has no employees, assets, or offices in Texas. 14. Neither 360 Wellness nor I maintain a registered agent in Texas. 15. I do not regularly visit Texas. My visits to Texas have been occasional and irregular and solely for leisure. 16. With the exception of this lawsuit, there is no pending litigation against me or 360 Wellness in the State of Texas and neither 360 Wellness nor I have availed ourselves of the courts of the State of Texas. 17. I never intended nor anticipated that I would be subject to suit in a Texas court and subjection to a Texas court's jurisdiction for the events alleged in Plaintiffs Original Petition. DECLARATION OF EMIR MUHOVIC 3 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 4 of 28 18. If I am required to defend this lawsuit in Texas, I will expend substantial time and effort traversing the distance between Georgia and Texas, causing me great inconvenience. Moreover, traveling to Texas to defend this lawsuit presents a substantial personal financial burden. 19. I have read the Motion to Dismiss for Lack of Personal Jurisdiction filed on behalf of Emir Muhovic. The factual statements contained therein and in this Declaration are within my personal knowledge and are true and correct. 20. I declare under penalty of perjury that the foregoing is true and correct. Executed in Cobb County, Georgia on the 10th day of March, 2017. Emir Muhovic DECLARATION OF EMIRMUHOVIC 4 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 5 of 28 Exhibit A Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 6 of 28 SUBCONTRACTOR MASTER DEVELOPMENT SERVICES AGREEMENT This Master Development Services Agreement (the "Agreement") is made and entered into effective as of May 20, 2016 (the "Effective Date") by and between 360 Wellness, LLC ("Subcontractor"), and Clarity Research and Consulting, LLC, a Delaware limited liability company ("CRC"). Each of Subcontractor and CRC may also be referred to herein individually as a "Party" and collectively as the "Parties." RECITALS: A. CRC supervises and coordinates the development, promotion, and marketing of research, study and clinical trial services for various healthcare provider customers (refe1Ted to hereinafter as the "Client" in the singular and the "Clients" in the plural). (Hereinafter each clinical trial study shall be referred to individually as the "Study" and collectively as the "Studies"). B. Although the Clients shall retain the ultimate supervisory responsibility for the Studies, CRC desires to engage Subcontractor upon the terms and conditions hereinafter set forth, to assist with the promotion, development and marketing of the Studies to physicians, and Subcontractor desires and is willing to accept such engagement upon such terms and conditions. AGREEMENT: NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the Parties agree as follows: l. Engagement. CRC hereby engages Subcontractor to assist with the promotion, development and marketing of the Studies, and in particular each Study described on the attached Addendum 1, which may be amended from time to time by the mutual consent of Parties, subject to and in accordance with the tenns and conditions set f01th herein. Subcontractor hereby accepts such engagement, for and in consideration of the compensation hereinafter provided, and agrees to use its best efforts in promoting, developing and marketing the Studies to physicians. 2. Term; Termination. (a) The initial term of this Agreement shall commence on the Effective Date and shall continue thereafter for a period of one (1) year unless earlier te1minated pursuant to the provisions of this Agreement. The term of this Agreement shall subsequently be extended automatically and without further action by either Party for successive 1-year periods, unless terminated as provided herein. Either Party may terminate this Agreement at any time with or without cause by giving the other Party at least thirty (30) days' written notice of such termination or by email, in which case such notice is deemed given at the time and date of such email correspondence. (b) In the event of a breach by Subcontractor of its obligations under this Agreement, CRC may terminate this Agreement immediately. -1- Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 7 of 28 (c) After completion of all Studies described on Addendum 1 either Party may terminate this Agreement with or without cause by providing the other Party with thirty (30) days' written notice of snch termination. ( d) In the event of termination of this Agreement by either Party, with or without cause, CRC will owe to Subcontractor only the compensation amounts for the Services (defined below) performed by Subcontractor prior to the termination. 3. Subcontractor's Duties and Responsibilities. (a) In carrying out its obligations under this Agreement, Subcontractor, subject to all of the provisions of this Agreement, shall assist with the coordination, promotion, development and marketing of the Studies to physicians and to take such actions as reasonably necessary in order to accomplish such duties, including, bnt not limited to, marketing, development, promotional and education services described in more detail on Exhibit A (collectively the "Services"). (b) In performing its Services w1der this Agreement, Subcontractor shall use reasonable eff01is to perform its duties in a competent and timely fashion. (c) All matters requiring professional medical judgments relating to the Clients and the Studies shall remain the sole responsibility of the Clients and their staff and other healthcare professionals performing medical services fortheir operations and the Studies (whether as owners, employees or independent contractors), and CRC and Subcontractor shall have no responsibility whatsoever for such judgments. (d) Subcontractor represents and warrants to CRC that Subcontractor and, as applicable, each professional who shall provide professional services at or for the Studies (whether as an owners, employee or independent contractor), shall (i) be, as applicable, duly licensed as required by state and federal law, (ii) have ce1iification, training and credentialing appropriate for the professional services perfo1med by such professionals, and (iii) have professional insurance coverage in an amount reasonably acceptable to CRC. (e) During the term of this Agreement, the Subcontractor shall procure and maintain, comprehensive general liability insurance coverage and workers' compensation insurance coverage with insurance carriers and with coverage limits reasonably acceptable to CRC. In no event shall an insurance carrier be replaced or changed by Subcontractor without prior notice to CRC. In addition, should Subcontractor change insurance carriers during the term of this Agreement, Subcontractor shall procure and maintain, with commercial carriers reasonably acceptable to CRC, coverage which includes claims incurred but not reported under the prior coverage (prior acts coverage) or an extended reporting period or "tail" for the expiring policy. Certificates of insurance for coverage required herein and any and all accompanying endorsements shall be provided by Subcontractor to CRC within thirty (30) days of the execution of this Agreement and annually thereafter within thirty (30) days of any such policy renewal or replacement. 4. Development Fee. For its Services rendered under this Agreement, Subcontractor shall be paid a Development Fee as hereinafter defined on Exhibit B during the term of this -2- Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 8 of 28 Agreement, beginning as of the Effective Date. The Development Fee shall be paid on the fifteenth (15t11) day of each calendar month, and shall be prorated on a daily basis for any partial calendar month during the tenn of this Agreement. 5. LIMITATION OF LIABILITY; INDEMNIFICATION; SURVIVAL. SUBCONTRACTOR SHALL USE REASONABLE JUDGMENT IN RENDERING THE SERVICES FOR CRC CONTEMPLATED HEREBY. AS AN INDUCEMENT TO CRC TO CONTRACT WITH SUBCONTRACTOR TO RENDER SUCH SERVICES, SUBCONTRACTOR AGREES THAT CRC AND ITS MEMBERS, OWNERS, MANAGERS, OFFICERS, EMPLOYEES, AGENTS CONTRACTORS, AND REPRESENTATIVES (THE "CRC INDEMNIFIED PARTIES") SHALL NOT BE SUBJECT TO ANY LIABILITY TO SUBCONTRACTOR OR TO ANY OWNER, AGENT, CONTRACTOR OR AFFILIATE OF SUBCONTRACTOR FOR ANY ACT TAKEN OR OMISSION SUFFERED UNLESS THE SAME IS THE RESULT OF ANY GROSSLY NEGLIGENT ACT OR WILLFUL MISCONDUCT OF CRC. SUBCONTRACTOR AGREES TO INDEMNIFY AND HOLD THE CRC INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST ANY AND ALL EXPENSES, LIABILITIES, DAMAGES, TAXES, CHARGES AND CLAIMS OF ANY KIND OR NATURE SUCH PERSONS MAY INCUR (INCLUDING REASONABLE ATTORNEYS' FEES AND EXPENSES) RELATING TO (I) ANY ACTION TAKEN OR OMITTED BY THE CRC INDEMNIFIED PARTIES, EXCEPT AS TO MATTERS IN WHICH THE CRC INDEMNIFIED PARTIES HAVE EXERCISED WILLFUL MISCONDUCT OR GROSS NEGLIGENCE; OR (II) ANY ACT OR OMISSION OF SUBCONTRACTOR OR ANY BREACH OF THIS AGREEMENT BY SUBCONTRACTOR. THE PROVISIONS OF THIS SECTION 5 WILL SURVIVE ANY TERMINATION OR EXPIRATION OF TIDS AGREEMENT AND CONTINUE ACCORDING TO THEIR TERMS. 6. Compliance with Laws. Subcontractor shall provide the Services in compliance with all applicable law, including, but not limited to, state and federal laws and regulations affecting billing and reimbursement, referrals, and patient privacy and security and in compliance with the Safe Harbor Compliance and Clinical Services, LLC, corporate compliance program. Subcontractor shall cause all of its employees and contractors performing the Services to review the Code of Conduct, attached as Exhibit D and incorporated by reference, and the policies addressed therein and execute the applicable attestation. Further, Subcontractor represents it has a compliance program which demonstrates its connnitment to compliance described herein and appropriate for its services and organization. Neither Party shall knowingly or purposely take any action, or allow any third paiiy to take any action, that would: (i) cause any governmental authority to institute any proceeding for the rescission, suspension, or revocation of any license, permit, consent, or approval obtained by the applicable Client for the operation of its business or the Studies; (ii) cause any accrediting organization to institute any proceeding or action to revoke any accreditation once obtained; or (iii) adversely affect, once obtained, Client's continued participation in, as applicable, Medicare, Medicaid, or any other public or private medical payment program. -3- Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 9 of 28 7. Independent Contractor. In the performance of Subcontractor's work, duties and obligations under this Agreement, it is mutually understood and agreed by the Pmties that Subcontractor is at all times acting m1d performing as an independent contractor. CRC shall neither have nor exercise any control or direction over the methods by which Subcontractor or its employees, if any, shall perform their work and functions. Nothing herein contained shall be construed to limit Subcontractor from providing similar Services to other companies as long as the provision of such Services does not infringe upon Subcontractor's ability to perform its duties under this Agreement. Subcontractor agrees not to hold itself out as an CRC employee or in any other capacity as an authority or representative that may make decisions for CRC. 8. Confidential Information. Each Paity recognizes and acknowledges that, by virtue of entering into this Agreement and performing its respective obligations hereunder, such Party may have access to certain infonnation of the other Pmty that is confidential and constitutes proprietary, valuable, special and unique property of the other Party. The Pa1ties agree that they will not at any time, either during or subsequent to the term hereof, disclose to others, use, copy or permit to be copied, without the express prior written consent of the other Party whose confidential information is so disclosed or used, except pursuant to the perfotmance of such Party's duties hereunder or pursuant to a valid order by a court or other goverrunental body or as otherwise required by law, any confidential or proprietary information of the other Party, including, but not limited to, information which concerns patients, costs, financials, strategies, or methods of operation or marketing, and which is not otherwise available to the public. 9. Patient Information. Subcontractor acknowledges ai1d agrees that Subcontractor shall be deemed to constitute a subcontractor "Business Associate" ofCRC and the Clients as such term is defined in the privacy and security requirements of the Health Insurance Portability and Accountability Act of 1996, and its implementing regulations ("HIP AA"). Moreover, Subcontractor acknowledges that during perfonnance of Services under this Agreement, it may have access to individually identifiable health information that is subject to the applicable Administrative Simplification Provisions of HIP AA, and the Parties shall sign a Subcontractor Business Associate Agreement in the form attached hereto as Exhibit C. With regard to Protected Health Information (as defined in the Parties' Subcontractor Business Associate Agreement), both Paities shall comply with all applicable privacy and security laws and regulations, specifically including HIP AA. Capitalized terms used in this Section 9 shall have the meanings set forth below, or if not defined herein, the meai1ings set forth in the HIP AA. I 0. Development Materials. Subcontractor agrees that before it uses, distributes, or displays any advertising, development, or marketing materials of CRC (the "Materials") (other than those provided by CRC), Subcontractor shall submit to CRC such Materials for CRC's review and written approval. Once the Materials have been approved by CRC, Subcontractor shall not make modifications to such Materials without first obtaining SHCSS's written consent. 11. No Government Payors. In collilection with the Studies and Services provided, the Pmties and the Clients will not bill or seek reimbursement from Medicare, Medicaid, or any government payor. The Parties agree that no Party will refer to other Party any patient whose treatment is covered or reimbursable by Medicare, Medicaid, or any government payor. -4- Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 10 of 28 12. Health Care Services Laws and Regulations. The Patties enter into this Agreement with the intent of conducting their relationship in full compliance with applicable laws, including without limitation, the federal Anti-Fraud and Abuse statutes and regulations, the so-called "Stark Law" and its implementing regulations, and any applicable state prohibitions on solicitation or referrals of patients or healthcare services ("State Anti-Referral Laws"). Notwithstanding any unanticipated effect of any of the provisions of this Agreement, neither Patty shall intentionally conduct themselves under this Agreement in a manner that would constitute a violation of any provision of the federal Anti-Fraud and Abuse statutes and regulations, the Stark Law and its implementing regulations, or, State Anti-Referral Laws. Moreover, nothing contained in this Agreement shall require (directly or indirectly, explicitly or implicitly) the Paities to refer or direct any patients to one another or to otherwise use one another's services or facilities, or those of any their affiliates. Neither Party shall offer, pay, accept or receive any remuneration from the other Paity for securing or soliciting patients. 13. Notices. Any notice to be sent hereunder, except as specified in Section 2 (a), shall be either hand delivered or sent by registered mail, return receipt requested, addressed to the appropriate Party at: Subcontractor: 360 Wellness, LLC 6066 Fannwood Way Mableton, GA 30126 Attention: Emir Muhovic CRC: Clarity Research and Consulting, LLC 6300 Bridgepoint Pkwy, Bldg 3, Suite 200 Austin, TX 78730 14. Assignment. Except as expressly provided herein, Subcontractor may not assign this Agreement nor any of its duties or obligations hereunder without the prior written consent of CRC. CRC may assign this Agreement in its sole discretion. Subject to the foregoing, this Agreement shall be binding upon, and inure to the benefit of, the successors in interest and pennitted assignees of the Parties hereto. 15. Entire Agreement. This Agreement and its Exhibits contains the entire agreement of the Parties relating to the subject matter hereof, and the Parties have made no agreements, representations or warranties relating to the subject matter of this Agreement, which are not set fmth herein. No amendment or modification of this Agreement shall be valid unless made in writing and signed by each of the Parties. No term or condition of this Agreement shall be deemed to have been waived except by written instrument of the Party charged with such waiver. 16. Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof and this Agreement shall be considered as if such invalid, illegal, or unenforceable provision had never been contained in this Agreement. -5- Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 11 of 28 17. Governing Law; Venue. This Agreement shall be construed and enforced in accordance with the laws of the State of Texas, excluding any conflict of law provision which would refer to the law of another jurisdiction, and the Parties agree that venue of any litigation under this Agreement shall be in Travis County, Texas. 18. Counterparts; Electronic Signatures. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed to be an original, but all of which together constitute one and the same instrument. The parties agree to rely upon an electronic signature process as official authorization for this Agreement as well as any transactions conducted pursuant to this Agreement by the parties. Each party affirmatively consents to conduct each transaction by electronic means and further agrees that electronic signatures shall have the same force and effect as an original signature with respect to this Agreement and all transactions conducted pursuant to this Agreement. Either party may revoke approval of this electronic signature process at any time with prior written notice to the other party; however this will result in the other party's suspension or termination of perfonnance of its rights and obligations under this Agreement absent an acknowledgment of agreement or consent by other valid legal means. 19. Headings, Interpretation. Descriptive headings are for convenience only and will not control or affect the meaning or construction of any provision of this Agreement. Whenever the context of this Agreement requires, words used in the singular will be construed to include the plural and vice versa, and pronouns of whatsoever gender will be deemed to include and designate the masculine, feminine or neuter gender. 20. Attorneys' Fees. In any action or suit to enforce any right or remedy under this Agreement, the prevailing Paity shall be entitled to recover its costs, including reasonable attorneys' fees. [Remainder of Page Intentionally Left Blank] -6- Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 12 of 28 IN WITNESS WHEREOF, this Agreement has been executed on behalf of the Parties as of the Effective Date. Subcontractor: 360 WELLNES, LLC j' By: {vA¢ 1 iclo,;" Name: Emir Muhovi c Title: President CRC: CLARITY RESEARCH AND CONSUL TING, LLC By: ,,,if :.~ Name: 'A?!AN' /1'4,tLLf"/L Title: Scr;RErARl -7- Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 13 of 28 [OPERA] Study [TARGET] Study [TREAT] Study ADDENDUM! DESCRIPTION OF STUDIES SEE QUICK REFERENCE GillDES ATTACHED HERETO Addendum I - Page I Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 14 of 28 EXHIBIT A DEVELOPMENT SERVICES The Services of Subcontractor shall include: 1. Promoting the Studies to physicians and other applicable scientists and clinicians 2. Educating the physicians, scientists and clinicians on the terms of the Studies 3. Facilitating proper education and discussions regarding Study materials 4. Reporting recommendations for developing new clinical trial services to CRC based on discussions with physicians, scientists and clinicians Exhibit A - Page 1 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 15 of 28 EXHIBITB DEVELOPMENT FEE CRC shall pay Subcontractor a set in advance flat fair market value fee of $1,000.00 per month for the Services provided by Subcontractor (the "Development Fee"). Exhibit B- Page 1 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 16 of 28 EXHIBITC HIP AA SUBCONTRACTOR BUSINESS ASSOCIATE AGREEMENT This HIP AA Subcontractor Business Associate Agreement (this "Agreement") is by and between Clarity Research and Consulting, LLC ("Business Associate") and 360 Wellness, LLC ("Subcontractor") and effective as of May 20, 2016 (the "Effective Date"). RECITALS A. Business Associate provides certain services to various "Covered Entities" (defined below), which require Business Associate to have access to certain Protected Health Infonnation (defined below). B. Pursuant to the services Business Associate provides to each Covered Entity, the Covered Entity may disclose to Business Associate, or Business Associate may create on the Covered Entity's behalf, Protected Health Information that is subject to protection under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA," found at Public Law 104-191), and certain privacy and security regulations promulgated by the U.S. Department of Health and Human Services to implement certain provisions of HIP AA and the Health Info1mation Teclmology for Economic and Clinical Health Act (the "HITECH Act"), as modified by the Final Omnibus Rule effective as of March 26, 2013 (collectively the "HIP AA Regulations," found at 45 C.F.R. Parts 160, 162 and 164). C. Business Associate has contracted with Subcontractor to provide certain services for Business Associate in connection with the services Business Associate performs for each Covered Entity. D. Business Associate will make available and/or transfer to Subcontractor certain Protected Health Information, in conjunction with the performance of a fnnction or activity that is being provided on behalf of Business Associate, for the benefit of the Covered Entity, which is confidential and must be afforded special treatment and protection under the Privacy Rule and the Security Standards. E. Pursuant to the HIP AA Regulations, all applicable subcontractors of Business Associate, as a condition of doing business with Business Associate, must agree in writing to certain mandatory provisions regarding, among other things, the privacy and security of Protected Health Information. NOW THEREFORE, IN CONSIDERATION OF THE FOREGOING, and the mutual promises and covenants contain herein, the parties agree as follows: Exhibit C - Page 1 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 17 of 28 AGREEMENT 1. Definitions. Te1ms used, but not otherwise defined, in this Agreement shall have the same meaning as those te1ms in the HIP AA Regulations. (a) "Breach" means the unauthorized acquisition, access, use, or disclosure of Protected Health Information, which compromises the security or privacy of such Protected Health Information, but does not include circumstances excluded from the definition of Breach as provided in 45 C.F.R. 164.402. (b) "Covered Entity" means a (i) health plan, (ii) health care clearinghouse, (iii) or health care provider who transmits any health infonnation in electronic form in connection with a transaction covered by the HIP AA Regulations. ( c) "Data Aggregation" has the same meaning as the tenn "data aggregation" in 45 C.F .R. 164.50 I. ( d) "Designated Record Set" has the same meaning as the term "designated record set" in 45 C.F.R. 164.501. (e) "Electronic Protected Health Information" or "ePHI" has the same meaning as the term "electronic protected health infonnation" in 45 C.F.R. 160.103, limited to information created, or received or transmitted by Subcontractor or Business Associate from or on behalf of Business Associate or a Covered Entity. (f) "Individual" has the same meaning as the term "individual" in 45 C.F.R. 160.103 and shall include a person who qualifies as a personal representative in accordance with 45 C.F.R. 164.502(g). (g) "Limited Data Set" has the same meaning as the term "limited data set" in 45 C.F.R. 164.514(e)(2). (h) "Privacy Rule" means the Standards for Privacy oflndividually Identifiable Health Information at 45 C.F.R. parts 160 and 164. (i) "Protected Health Information" or "PHI" has the same meaning as the term protected health information" in 45 C.F .R. 160.103, limited to the information created or received by Subcontractor or Business Associate from or on behalf of Business Associate or a Covered Entity. Protected Health Information shall include Electronic Protected Health Inf01mation. G) "Required by Law" has the same meaning as the tenn "required by law" in 45 C.F.R. 164.103. (k) "Secretary" means the Secretary of the U.S. Department of Health and Hwnan Services or his designee. Exhibit C - Page 2 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 18 of 28 (I) "Security Standards" means the Security Standards for the Protection of Electronic Protected Health Information at 45 C.F.R. parts 160 and 164. 2. Obligations and Activities of Subcontractor. (a) Specific Uses and Disclosures. Except as otherwise limited in this Agreement, Subcontractor may receive, create, use, disclose, maintain, or transmit Protected Health Information to perform functions, activities, or services for, or on behalf of, Business Associate or a Covered Entity provided that such use or disclosure would not violate the Privacy Rule or Security Standards if done by Business Associate or a Covered Entity and as permitted herein. To the extent Subcontractor is carrying out any obligation of Covered Entity or Business Associate with respect to the HIP AA Regulations, Subcontractor shall comply with such requirements of the HIPAA Regulations that apply to Covered Entity or Business Associate in the performance of such obligations. (b) Other Subcontractors. As part of Subcontractor providing functions, activities, and/or services to Business Associate as identified in Section 2(a), Subcontractor may disclose information, including Protected Health Infonnation, to other subcontractors of Business Associate and may use and disclose information, including Protected Health Infonnation, received from other subcontractors of Business Associate as if this information was received from, or originated with, Business Associate; provided Subcontractor obtains reasonable and satisfactory assurances from such subcontractor that such Protected Health Information will be held confidentially and used or further disclosed only as Required by Law or for the purpose for which it was disclosed to the subcontractor. Subcontractor shall ensure that the applicable subcontractor notify Subcontractor of any instances of which they are aware in which the confidentiality of the PHI has been breached. (c) Data Aggregation. Subcontractor may provide Data Aggregation services relating to the health care operations of Covered Entity. (d) Permitted Uses and Disclosures. Subcontractor agrees to not use or further disclose Protected Health Information other than as permitted or required by this Agreement or as Required by Law. (e) Safeguards for Protection of Protected Health Information. Subcontractor agrees to use appropriate safeguards to prevent use or disclosure of the Protected Health Information other than as provided for by this Agreement or as Required by Law. (f) Reporting of Unauthorized Uses or Disclosures. Subcontractor agrees to report to Business Associate, in writing, as soon as possible, but no later than within five (5) days of Subcontractor's discovery, any use or disclosure, including Breach, of the Protected Health Information not provided for by this Agreement. (g) Content of Report of Breach. In the event of a Breach of Protected Health Information, Subcontractor shall provide Business Associate a written report, Exhibit C - Page 3 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 19 of 28 without unreasonable delay, but no later than within five (5) business days of Subcontractor's awareness of the Breach. The report shall include: (i) the identification of each Individual whose PHI has been, or is reasonably believed by Subcontractor to have been, accessed, acquired, used, or disclosed during the Breach; (ii) a brief description of what happened, including the date of the Breach and the date of the discovery of the Breach, if known; (iii) a description of the types of PHI that were involved in the Breach (i.e., full name, social security number, date of birth, home address, account number, diagnosis, disability code, or other types of infonnation that were involved); (iv) any steps that Business Associate or the Individual (impacted by the Breach) should take to protect himself or herself from potential harm resulting from the Breach; (v) a brief description of what Subcontractor is doing to investigate the Breach, to mitigate harm to the Individual, and to protect against further Breaches; and (vi) contact procedures for Business Associate and the Individual to ask Subcontractor questions or learn additional information from Subcontractor, which shall include a telephone number, an e-mail address, and postal address. Subcontractor shall be responsible for any and all costs related to the notification to Business Associate, a Covered Entity, Individuals or their representatives or next of kin of any security or privacy Breach that should be reported by Subcontractor to Business Associate. (h) Mitigation of Unauthorized Uses or Disclosures. Subcontractor agrees to mitigate, to the extent practicable, any harmful effect that is known to Subcontractor, or one of Subcontractor's agents or subcontractors, of a use or disclosure of Protected Health Information by Subcontractor in violation of the requirements of this Agreement or the HIP AA Regulations. (i) Agents and Subcontractors. Subcontractor agrees to ensure that any agent, including a subcontractor, to whom Subcontractor provides Protected Health Information, or that creates, receives, maintains or transmits Protected Health Information on behalf of Subcontractor, Business Associate or a Covered Entity, agrees in writing to the same restrictions and conditions that apply through this Agreement to Subcontractor with respect to such Protected Health Information. Subcontractor agrees to ensure that any agent, including a subcontractor, to whom Subcontractor provides Electronic Protected Health Information agrees to implement reasonable and appropriate safeguards and security measures to protect such Electronic Protected Health Infmmation. Exhibit C - Page 4 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 20 of 28 Gl Authorized Access to Protected Health Information. Subcontractor agrees to provide access to Protected Health Information, at the request of Business Associate or a Covered Entity, and in the time and manner (including, as applicable, in electronic format or electronic copies) designated by Business Associate or the Covered Entity, in a Designated Record Set, to the Individual or to Business Associate or the Covered Entity in order to allow Business Associate and the Covered Entity to meet the requirements under 45 C.F .R. 164.524. (k) Amendment of Protected Health Information. Subcontractor agrees to make any Protected Health Information available for any amendments, and to incorporate any amendment(s) to Protected Health Infonnation in a Designated Record Set that the Business Associate or a Covered Entity directs or agrees to pursuant to 45 C.F.R. 164.526 at the request of Business Associate, the Covered Entity or an Individual, and in the time and manner designated by Business Associate or the Covered Entity. (I) Secretary's Right to Audit. Subcontractor agrees to make internal practices, books, and records relating to the use and disclosure of Protected Health Information received from, or created or received by Subcontractor on behalf of, Business Associate or a Covered Entity available to the Secretary, in a time and manner designated by the Secretary, for purposes of the Secretary determining Business Associate's or a Covered Entity's compliance with the Privacy Rule. (m) Accounting for Uses and Disclosures. Subcontractor agrees to document such disclosures of Protected Health Information and information related to such disclosures as would be required for Business Associate or a Covered Entity to respond to a request by an Individual for an accounting of disclosures of Protected Health Information in accordance with: (i) The HIP AA Regulations accounting requirements as provided in 45 C.F.R. 164.528; and (ii) The accounting requirements as provided in the HITECH Act, as amended, in the event Business Associate or a Covered Entity uses or maintains an electronic health record at any time during this tenn of this Agreement. Subcontractor agrees to provide to Business Associate, in writing and within fifteen (15) days of a request, information collected in accordance with this section to pennit Business Associate to respond to a request by an Individual for an accounting of disclosures of Protected Health Infmmation. (n) Safeguards for Protection of Electronic Protected Health Information. Subcontractor shall utilize appropriate and commercially reasonable administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of Electronic Protected Health lnfmmation maintained or transmitted on behalf of Business Associate or a Covered Entity, other than as provided for by this Agreement. Exhibit C - Page 5 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 21 of 28 ( o) Security Incidents. Subcontractor agrees to report to Business Associate, within two (2) business days, any security incident, including, but not limited to, any successfully unauthorized access, use, disclosure, modification, or destruction of ePHI or interference with system operations in an information system containing PHI of which Subcontractor becomes aware. (p) General Privacy Rule and Security Standards Compliance. Subcontractor acknowledges that Subcontractor is Required by Law to comply with the HIP AA Security Standards in accordance with 45 C.F.R. 164.302 through 164.316 and the provisions of the HIP AA Privacy Rule in accordance with 45 C.F.R. 164.504(e) in the same manner that such sections apply to Business Associate and a Covered Entity, with respect to compliance with the standards in 45 C.F.R. 164.502(e) and 45 C.F.R. 164.504(e). (q) Minimum Necessary Requirement. Subcontrnctor shall comply with the minimum necessary requirement, in accordance with 45 C.F.R. 164.502(b) of the HIPAA Regulations, with respect to the use, disclosure, or request of Protected Health Information by limiting such Protected Health Information, to the extent practicable, to: (i) The Limited Data Set; or (ii) The minirnwn necessary to accomplish the intended purpose of such use, disclosure or request. 3. Obligations of Business Associate. (a) Revocation of Permitted Use or Disclosure of Protected Health Information. Business Associate shall provide Subcontractor with any changes in, or revocation of, permission by an Individual to use or disclose Protected Health Information, if such changes affect Subcontractor's permitted or required uses and disclosures. (b) Restrictions on Use of Disclosure of Protected Health Information. Business Associate shall notify Subcontractor of any restriction to the use or disclosure of Protected Health Information that Business Associate or a Covered Entity has agreed to in accordance with 45 C.F.R. 164.522, to the extent that such restriction may affect Subcontractor's use or disclosure of PHI. (c) Requested Uses or Disclosures of Protected Health Information. Business Associate shall not request Subcontractor to use or disclose Protected Health lnfonnation in any manner that would not be permissible under the Privacy Rule if done by Business Associate. 4. Tenn and Termination. (a) Term. Except as otherwise provided, this Agreement shall commence on the Effective Date and continue until all of the Protected Health Information provided by Business Associate to Subcontractor, or created or received by Subcontractor on Exhibit C - Page 6 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 22 of 28 behalf of Business Associate or a Covered Entity, is destroyed or returned to Business Associate; or if Subcontractor believes that it is infeasible to return or destroy such Protected Health Information then, upon the written consent of Business Associate, the Protected Health Information will not be destroyed or returned, and Subcontractor will extend the protections to such Protected Health Information in accordance with the termination provisions in this Section. (b) Termination for Cause. Upon Business Associate's knowledge of an activity or practice of Subcontractor that constitutes a breach or violation of this Agreement by Subcontractor, Business Associate shall infonn Subcontractor in writing of such breach or violation and provide Subcontractor an opportunity to cure, to Business Associate's satisfaction, within thiliy (30) days. If Subcontractor does not cure the breach or violation within thiiiy (30) days, Business Associate may inunediately tenninate this Agreement and any underlying agreements between Business Associate and Subcontractor upon written notice to Subcontractor. (c) Effect of Termination. (i) Except as provided in paragraph (ii) of this Section, upon termination of this Agreement, for any reason, Subcontractor shall return or destroy all Protected Health Infmmation received from Business Associate, or created or received by Subcontractor on behalf of Business Associate or a Covered Entity. This provision shall apply to Protected Health hlformation that is in the possession of subcontractors or agents of Subcontractor. Subcontractor shall retain no copies of the Protected Health Information. (ii) In the event that Subcontractor determines that returning or destroying the Protected Health Information is infeasible, Subcontractor shall provide to Business Associate notification of the conditions that make the return or destruction infeasible. Subcontractor shall extend the protections of this Agreement to such Protected Health hlformation and limit further uses and disclosures of such Protected Health hlformation to those purposes that make the return or destruction infeasible, for so long as Subcontractor maintains such Protected Health Information; provided Subcontractor obtains in advance the written consent of Business Associate to maintain and not destroy the Protected Health Information. 5. Miscellaneous. (a) Amendment. Subcontractor and Business Associate agree to take such action as is reasonably necessary to amend this Agreement from time to time as is necessary for Business Associate, Covered Entity and Subcontractor to comply with the requirements of the HIPAA Regulations and any amendment thereto. This Agreement may not be modified, nor shall any provision hereof be waived or amended, except in a writing duly signed and agreed to by Subcontractor and Business Associate. Exhibit C - Page 7 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 23 of 28 (b) Interpretation. In the event of an inconsistency between the provisions of this Agreement and the mandatory terms of the HIP AA Regulations, the HIP AA Regulations shall prevail. Where provisions of this Agreement are different from those mandated by the HIP AA Regulations, but are nonetheless pennitted by law, the provisions of this Agreement shall control. (c) No Third Party Beneficiaries. Nothing express or implied in this Agreement is intended to confer, nor shall anything herein confer, upon any person other than Subcontractor and Business Associate, and their respective successors or assigns, any rights, remedies, obligations, or liabilities whatsoever. (d) Notices. Any notices to be given hereunder shall be made via U.S. Mail or express courier, or hand delivery to the respective address given below, and/or (other than for the delivery of fees) via fax to the fax numbers listed below. (e) Regulatory References. A reference in this Agreement to a section in the HIPAA Regulations means the section as in effect or as amended, and for which compliance is required. (f) Subpoenas. In the event that Subcontractor receives a subpoena or similar notice or request from any judicial, administrative or other party in connection with this Agreement, including, but not limited to, any unauthorized use or disclosure of PHI in breach of this Agreement or in violation of the HIP AA Regulations, Subcontractor shall as soon as practicable forward a copy of such subpoena, notice or request to Business Associate and afford Business Associate the opportunity to exercise any rights Business Associate may have under the law. (g) Indemnity. SUBCONTRACTOR SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS BUSINESS ASSOCIATE, ITS OFFICERS, EMPLOYEES, REPRESENTATIVES, OWNERS, MEMBERS AFFILIATED COMPANIES, AND AGENTS FROM AND AGAINST ANY AND ALL THIRD PARTY CLAIMS, GOVERNMENT INVESTIGATIONS OR ENFORCEMENT ACTIONS, OR OTHER ACTIONS, DEMANDS AND LAWSUITS (TOGETHER "CLAIMS") AND ALL RESULTING COSTS, LIABILITIES, DAMAGES AND EXPENSES INCLUDING REASONABLE ATTORNEYS' FEES ARISING OUT OF SUBCONTRACTOR'S (I) UNAUTHORIZED DISCLOSURES OF PROTECTED HEALTH INFORMATION; (II) BREACH OF IDPAA REGULATIONS, PRIVACY, SECURITY OR ANY TERM OR PROVISION OF THIS AGREEMENT, (II) VIOLATION OF ANY LAW OR REPRESENTATION, WARRANTY OR COVENANT IN THIS AGREEMENT; OR (Ill) ACTION OR INACTION UNDER THIS AGREEMENT. BUSINESS ASSOCIATE SHALL PROVIDE SUBCONTRACTOR WRITTEN NOTICE OF ANY CLAIM COVERED BY THIS SECTION. SUBCONTRACTOR SHALL PAY THE EXPENSES OF ALL COSTS. BUSINESS ASSOCIATE MAY TAKE PART IN THE DEFENSE, AT THE REASONABLE EXPENSE OF SUBCONTRACTOR. Exhibit C - Page 8 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 24 of 28 (h) Survival. The respective rights and obligations of Subcontractor under Sections 4 and 5(g) of this Agreement shall survive the termination of this Agreement. (i) Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the State of Texas to the extent that the provisions of the HIP AA Regulations do not preempt the laws of the State of Texas. (Signatures begin on next page) Exhibit C - Page 9 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 25 of 28 IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed in such party's name and on such party's behalf as of the Effective Date. SUBCONTRACTOR 360 Wellness, LLC 6066 Farmwood Way Mableton, GA 30126 Phone:770-883-2713 Fax Number:404-810-0099 Email: emuhovic@icloud.com By: Clu•r);,l~v.! Print Nam(: Fmj r Muhoyj c Print Title: president BUSINESS ASSOCIATE Clarity Research and Consulting, LLC 6300 Bridgepoint Pkwy, Bldg 3, Suite 200 Austin, TX 78730 Phone: (512) 279-4501 Fax Number: --- Email: finance@shcacs.com EXHIBITD Exhibit C- Signature Page Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 26 of 28 CODE OF CONDUCT & ATTESTATION OF COMPLIANCE The undersigned hereby agrees to abide by all of the following while representing the products or services of Clarity Research and Consulting, LLC (the "Organization"), which adopted the compliance program of Safe Harbor Compliance and Clinical Services, LLC. I WILL: 1. Treat each provider and /or customer (collectively "Customer") with whom I work representing products and/or services of the Organization or the Organization's clients with respect, courtesy, understanding, professionalism, and empathy. 2. Accurately represent my professional qualifications, professional licenses, and other such endorsements or criteria. 1 will not provide advice or guidance beyond my professional capabilities, qualifications and authority. 3. Represent services and/or products with complete accuracy, thoroughness, and honesty. Under no circumstance will I exaggerate, lie about or knowingly misrepresent any feature about any product or service of the Organization or the Organization's clients. Ifl don't know the answer to a question, I will find the correct answer and will not simply guess or make-up an answer. I will not make any promises or representations on behalf of the clients that I have not been specifically authorized in writing to make. 4. Abide by all applicable federal and state laws, regulations, and the Organization's policies and procedures as they relate to compliance with the law including, but not limited to, Relationships with Health Care Professionals and Other Referral Sources and those governing the solicitation and sale of the Organization or Organization's clients' products. In addition, I will complete any and all training offered by the Organization related to this Code of Conduct and the laws/regulations as they apply to the Organization and the Organization's clients, as well as the obligations and responsibilities that apply to me and my employer under my employer's service agreement(s) with the Organization. 5. Not offer incentives of any kind to Customers or any entity with which a Customer has a financial interest where any purpose of the remuneration is or could be construed as an attempt to influence a Customer's use of products and/or services of the Organization or Organization's clients. The term "remuneration" includes anything of value that is given directly or indirectly, overtly or covertly, in cash or in kind. I understand that if I engage in any activities which may violate this understanding, the Organization reserves the right to immediately terminate any relationship with me of my employer. 6. Use only advertising, marketing, sales presentation, enrollment and other materials which have been provided to me by the Organization or that have been approved in writing by the Organization's clients for my use. 7. Provide timely service to Customers with professionalism, competence, integrity and sincerity. Exhibit D - Page l Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 27 of 28 8. Immediately notify the Organization if I am excluded from participation in Medicare or any federal or state health care program under section 1128 and 1128A of the Social Security Act or as defined at 42 U.S.C. section 1320a-7b(f) or become subject of an investigation which could result in my exclusion. I will immediately notify the Organization ifl become aware that one of the Customers is excluded from participating under Medicare or any other federal or state health care program or becomes subject of an investigation which could result in Customer's exclusion or any other investigation or action by a government agency or a professional board. 9. Comply with laws and regulations concerning the privacy and security of patient identifiable health infonnation, also referred to as Protected Health Infonnation and will maintain the confidentiality of Protected Health Information whether in my possession or that I come across in carrying out services on behalf of the Organization. ATTESTATION: I have been contracted to provide certain educational, promotional, management and administrative services for Clarity Research and Consulting, LLC (the "Organization"), and its contracted clients. I understand that the Organization adopted the compliance program of Safe Harbor Compliance and Clinical Services, LLC, including the policy titled Relationships with Health Care Professionals and Other Referral Sources, and I agree to comply with this policy and other policies that the Organization may adopt from time to time, particularly as they relate to compliance with the law and its Code of Conduct. Copies of the Code of Conduct and the policy titled Relationships with Health Care Professionals and Other Referral Sources were provided to me, and I understand all tenns, conditions and requirements of the documents. I acknowledge that I was provided the opportunity to ask questions regarding my obligations as described herein and know where I should direct questions as they may arise in the future. 5/20/2016 Signature f Date Emir Muhovi c Printed Name Exhibit D - Page 2 Case 1:17-cv-00203-SS Document 10-1 Filed 03/10/17 Page 28 of 28