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Pharmacogenetics Diagnostic Laboratory, LLC v. Essential Molecular Testing Corporation, Llc-Pgxl Partners, LLC

United States District Court, Sixth Circuit

November 8, 2013

PHARMACOGENETICS DIAGNOSTIC LABORATORY, LLC, Plaintiff,
v.
ESSENTIAL MOLECULAR TESTING CORPORATION, LLC-PGXL PARTNERS, LLC and SCOTTGOODMAN, Defendants.

MEMORANDUM OPINION AND ORDER

JOHN G. HEYBURN, II, District Judge.

This matter is before the Court on Defendants' request for a preliminary injunction/temporary restraining order on their counterclaim regarding the proper interpretation of the payment terms in the underlying agreement between the parties.

On September 6, 2013, Plaintiff, Pharmacogenetics Diagnostic Laboratory, LLC ("PGXL"), filed a complaint against Defendants, Essential Molecular Testing Corporation - PGXL Partners, LLC ("EMTC") and Scott Goodman, EMTC's registered agent, asking this Court to declare the parties' August 1, 2012 Agreement ("Agreement") void ab initio because EMTC, the entity named in the Agreement, had not been properly formed as an LLC at the time.[1]

In response, Defendants requested this Court to enter injunctive relief barring Plaintiff from unilaterally changing its method of calculating commissions owed to EMTC under the Agreement. On October 10, 2013, the Court denied Defendants' request for an immediate hearing on the matter and ordered Plaintiff to brief the matter more fully. Plaintiff has complied and the Court will now assess the claims before it. For the reasons that follow, the Court will deny Defendants' request for injunctive relief.

I.

The facts pertinent to Defendants' request for injunctive relief are detailed below. The Court will not address Plaintiff's claims that an agreement does not exist (Count I) or that fraud infected the parties' dealings (Counts II-III) in the present Order. For purposes of this Order, the Court will assume an agreement exists.

Before PGXL instituted the present action to declare the Agreement between the parties void ab initio, or alternatively, voidable due to Defendant Goodman's fraud, PGXL's Executive Vice President of Business Operations, Wendell O'Neal, sent a letter to Scott Goodman dated July 31, 2013 announcing that, effective August 1, 2013, PGXL would change its method of calculating EMTC's monthly commission.

Under the Agreement, EMTC's monthly commission is "50% of the Gross Profits from all testing ordered through EMTC in such month, [but] such amounts shall not become due and payable to Essential Molecular until the payments from those tests are actually received by PGXL (i.e. payment being made for each test upon receipt of revenue for any portion of that test)." The term "Gross Profits" is defined by the Agreement as "revenue derived from testing generated by Essential Molecular... less costs to produce such testing which shall be defined between the Parties and will include [a list of items that does not mention costs of unreimbursed tests]."

The July letter indicated PGXL's plan to eschew the cost per test formula the parties had used from the beginning, whereby the cost per test decreased as the number of tests ordered increased.[2] PGXL averred that six months of evaluations had revealed "the actual costs per test performed as defined in the agreement is $42.50." PGXL indicated its intention to apply this amount retroactively to all tests serviced in 2013 that were paid for after August 1, 2013, and for all tests "ordered and performed"-whether or not PGXL ever received payment-from September 1, 2013 forward.[3] From the inception of the Agreement, PGXL had never deducted the costs for developing unreimbursed tests from revenue in order to calculate the amount it owed EMTC.

On October 2, 2013, PGXL sent an email demonstrating "corrected commission calculation[s]" that retroactively included costs for unreimbursed tests. This resulted in various "overpayments" that PGXL stated it would recuperate against remaining commissions owed to EMTC in 2013.

Defendants now urge this Court to enter an injunction prohibiting PGXL from unilaterally changing the cost per test formula and the method of calculating commissions payable to EMTC and further to prohibit PGXL from retroactively implementing such changes and setting off such costs in payments otherwise owed under the Agreement.

II.

In deciding whether to grant a temporary restraining order and preliminary injunction, the Court considers

(1) whether the [movant] has a substantial probability of success on the merits; (2) whether the injunction will save the [movant] from irreparable injury; (3) whether the injunction would harm others; ...

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