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Willis v. PCA Pain Center of Virginia, Inc.

Court of Chancery of Delaware

October 20, 2014

Willis
v.
PCA Pain Center of Virginia, Inc.

Submitted: June 23, 2014

Eric M. Andersen, Esquire Mark Andersen, P.A.

David L. Finger, Esquire Finger & Slanina, LLC

Dear Counsel:

Defendants PCA Pain Center of Virginia, Inc. ("PCA") and Konrad H. Kaeding ("Kaeding, " and with PCA, the "Defendants") have moved to dismiss or stay Pamela Willis ("Willis") and Physicians Interventional Pain Center, LLC's ("PIPC, " and with Willis, the "Plaintiffs") complaint (the "Complaint").[1] Through the Complaint, Plaintiffs seek redress for Defendants' alleged failure to proceed with agreements intended to transfer PCA's business to the Plaintiffs. Defendants argue that the Court lacks subject matter jurisdiction over what are essentially breach of contract claims and, regardless of jurisdiction, the Court should stay the action pending resolution of an action in Virginia filed less than one week before the Complaint.

I. BACKGROUND[2]

PCA is a pain clinic franchise located in Blacksburg, Virginia. PCA focuses on diagnosing and managing chronic pain. The company was formed on September 21, 2011 with Kaeding as its sole stockholder. Kaeding managed PCA as an absentee owner through 2012, while also employing a full-time practice manager. By 2012, the pain clinic's business was struggling and Kaeding consulted with Willis regarding the company's financial situation. Following their discussions, which continued through the summer and fall of 2012, Willis reviewed PCA's records and contracts and eventually travelled to Blacksburg to inspect the business first hand.

On December 6, PCA held a board meeting, with Kaeding and Willis as the two attendees. PCA retained Willis as a consultant in exchange for a percentage of the business's profit and a right to purchase assets or equity of PCA. At the December 6 meeting, PCA further resolved to engage Willis as a practice manager to replace the then current manager who had allegedly engaged in unethical business practices.

The day after the board meeting, Willis and Kaeding traveled to Virginia to meet with PCA's staff and transition Willis into her new position. From then until March 2013, Willis managed PCA, improving its financial condition. She ran the day-to-day operations, supervised staff, paid bills, kept the books, and marketed the business. Because of her success, Willis and Kaeding discussed how she would be compensated for her work. These discussions allegedly included the negotiation of a sale of PCA's assets to Willis.

On February 1, in contemplation of the asset sale, Willis signed PIPC's Certificate of Formation and mailed it to the Delaware Secretary of State. On the same day, PCA held a board meeting in part to authorize the sale of PCA's assets to PIPC (the "Asset Sale"). On February 5, PIPC's Certificate of Formation was filed by the Secretary of State and PCA passed a corporate resolution confirming the Asset Sale and a winding down of PCA's business.

The terms of the sale included (i) PCA retaining a right to use its assets while still in operation and (ii) PIPC agreeing to lease a space in Ridley Township, Pennsylvania in a building owned by a limited liability company owned by Kaeding. PIPC would also take over PCA's Blacksburg operations.

By the end of the month, Willis had opened bank accounts for PIPC, and in March, she began the credentialing process to move providers from PCA to PIPC. She also signed a lease on PIPC's behalf for the Pennsylvania property referenced in PCA's February 5 board resolution. Willis continued to manage PCA and prepare for the transfer of business to PIPC until 2013. She discovered unbilled work of approximately $200, 000 and attempted to collect that debt. PCA's business continued to improve and become profitable.

In July 2013, Kaeding began to interfere with Willis's operation of PCA. He allegedly made ill-advised promises to staff, interacted with employees managed by Willis without her knowledge, and decided that a biller was to deal solely with him, despite his lack of knowledge regarding the billing operation. Kaeding supposedly slandered Willis and undermined her authority. Then, in late August, Kaeding traveled to Virginia to take authority away from Willis more completely. In September, he locked Willis out of the clinic and attempted to halt the transfer of PCA's business to PIPC by shredding electronic fund transfer agreements and diverting money into PCA's accounts.

Kaeding continued his course of conduct into October by canceling Willis's PCA credit card, closing a joint account at Bank of America, and locking Willis out of company software, bank accounts, insurance carrier accounts, and the company's on-site mailbox. On October 1, 2013, Kaeding filed a certificate of amendment for PIPC with the Delaware Secretary of State claiming that he was the sole owner of PIPC and that Willis had formed PIPC as his personal assistant.

II. CURRENT PROCEEDINGS

Plaintiffs brought this action on October 11, 2013, shortly after Defendants ...


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