Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 1 of 32
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`
`v.
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`The Stellar Health Group, Inc., Benjamin
`Arnold Kraus, Michael Meng, Ari
`Brenner, and Howard Dubin,
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`Defendants.
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`December 18, 2020
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`Quality Health Ideas, Inc.,
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`Plaintiff,
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`UNITED STATES DISTRICT COURT
`DISTRICT OF CONNECTICUT
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`COMPLAINT
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`Plaintiff Quality Health Ideas, Inc. (“QHI”), by its attorneys, and in support of its claims
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`
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`against The Stellar Health Group, Inc. (“Stellar Health”), Benjamin Arnold Kraus (“Kraus”),
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`Michael Meng (“Meng”), Ari Brenner (“Brenner”), and Howard Dubin (“Dubin”) (collectively,
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`the “Defendants”) respectfully makes the following allegations:
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`NATURE OF THE ACTION
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`1.
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`This is an action brought by QHI against QHI’s former President and Chief
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`Operating Officer, and the QHI founders’ son-in-law, Benjamin Kraus, former QHI employees
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`Ari Brenner and Howard Dubin,1 and former QHI Board Advisor, Michael Meng, (collectively
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`the “Individual Defendants”) and Stellar Health, the Individual Defendants’ new business
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`venture that competes directly and unlawfully with QHI. Instead of acting in QHI’s best interest,
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`pursuant to their fiduciary duties to QHI, and their contractual obligations, the Individual
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`Defendants decided to loot QHI of its valuable business assets including its customers, business
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`prospects, perspective financing, software products, and other valuable trade secrets to stand-up
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`a competitor to QHI in the web-based healthcare platform space. Currently, Stellar Health
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`1 Kraus, Brenner, and Dubin are, collectively, the “QHI Employee Defendants”.
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`1
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 2 of 32
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`unlawfully competes directly with QHI in the web-based healthcare platform space using
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`technology developed by QHI over a number of years at great time and expense.
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`2.
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`The Individual Defendants’ and Stellar Health’s conduct, collectively and/or
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`individually, gives rise to claims of breach of fiduciary duties, aiding and abetting breach of
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`fiduciary duties, breach of contract, tortious interference, fraud, misappropriation of trade secrets
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`in violation of the United States Defend Trade Secrets Act (“DTSA”) 18 U.S.C § 1831 et seq.,
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`and the Connecticut Uniform Trade Secrets Act (“CUTSA”) Conn. Gen. Stat. § 35-50 et seq.,
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`and violations of the Connecticut Unfair Trade Practices Act (“CUTPA”) Conn. Gen. Stat. § 42-
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`110 et seq.
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`3.
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`QHI is entitled to monetary damages and equitable remedies in light of the
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`Defendants’ unlawful conduct as set forth below.
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`PARTIES
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`4.
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`Plaintiff QHI is a Delaware corporation with its principal place of business in
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`Suffield, Connecticut.
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`5.
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`6.
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`7.
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`8.
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`9.
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`Defendant Benjamin Arnold Kraus is a citizen of Massachusetts.
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`Defendant Michael Meng is a citizen of New York.
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`Defendant Ari Brenner is a citizen of New York.
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`Defendant Howard Dubin is a citizen of Connecticut.
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`Defendant Stellar Health is a Delaware Corporation with its principal place of
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`business in New York, NY.
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`JURISDICTION AND VENUE
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`10.
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`Subject matter jurisdiction also is conferred upon this Court pursuant to 18 U.S.C.
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`§ 1836(c), 28 U.S.C. §§ 1331 and 1367 and the doctrine of supplemental jurisdiction.
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`2
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 3 of 32
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`11.
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`This Court has personal jurisdiction over Stellar Health pursuant to Conn. Gen.
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`Stat. § 33-929(f) because the claims asserted herein arise out of or involve tortious conduct that
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`occurred and had effects in this state. For example, Stellar Health transacts business in this state,
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`has solicited QHI’s customers in this state, has misappropriated QHI’s trade secrets that are
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`located in this state and has committed unfair trade practices in this state. This Court has
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`personal jurisdiction over the non-resident Individual Defendants pursuant to Conn. Gen. Stat. §
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`52-59b(a) because the claims asserted herein arise out of or involve tortious conduct that
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`occurred and had effects in this state. Specifically, as employees and advisors of QHI, the non-
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`resident Individual Defendants breached fiduciary duties to QHI (or aided and abetted in such
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`breaches) while located in this state, breached contracts substantially performed in this state,
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`worked at facilities located in this state, and gained unlawful access to and misappropriated
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`QHI’s trade secrets that are located in this state. This court also has jurisdiction over defendant
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`Dubin who is a Connecticut resident.
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`12.
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`Pursuant to 28 U.S.C. § 1391, venue is proper in this Court because a substantial
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`part of the events or omissions giving rise to the claims occurred in Connecticut and because the
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`Individual Defendants and Stellar Health are subject to personal jurisdiction in Connecticut.
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`QHI BACKGROUND AND PRODUCTS
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`13.
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`QHI is a Connecticut based healthcare technology and consulting company that
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`created a web-based application that delivers actionable information to primary care providers,
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`improving their quality of care and reducing total medical expenses. Started by a husband and
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`wife team over twenty-two years ago, QHI has developed into a leading provider of software and
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`consulting services assisting healthcare practitioners nationwide.
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`14.
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`QHI’s main software product is CareScreen® and related services. CareScreen®
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`is a web-based application that delivers actionable information to primary care providers,
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`improving the quality of care delivered to patients and reducing total medical expenses. When
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`combined with QHI’s clinical service offerings, CareScreen® reduces bad outcomes to patients,
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`and reduces costs by reducing hospital and skilled nursing facility (SNF) days by facilitating
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`coordinated care, and optimizes payments to providers and health plans by identifying missed
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`chronic conditions, optimizing disease coding and severity, and maximizing value visits.
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`QHI’S CONFIDENTIAL INFORMATION AND TRADE SECRETS
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`15.
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`QHI built its business upon its ability to use and exploit certain confidential
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`information and trade secrets it has developed expending substantial time and resources. QHI
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`has maintained a competitive advantage through its ability to keep such information confidential
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`while exploiting it for financial gain and to help its contract partners deliver better care.
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`16.
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`QHI’s CareScreen® software product, and the source code underlying the
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`product, contain numerous trade secrets and confidential information. QHI delivers
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`CareScreen® to its users using a software as a service or “SaaS” licensing model, which means
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`that users of CareScreen® do not have access to the source code that underlies CareScreen® and
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`its implementing logic. Embedded within that source code is certain business logic that
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`differentiates CareScreen® in the marketplace, at substantial benefit to QHI and the clients that
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`utilize CareScreen®.
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`17.
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`One of the critical trade secrets embedded in CareScreen® is its Quality Value
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`Unit (“QVU®”) system. QVU® is a scoring methodology that builds upon providers’ and
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`payers’ knowledge of the “Relative Value Units” or RVUs system, which is used to measure
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`value in almost all care provider medical reimbursement formulae. Users of CareScreen®
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`services benefit from using QVU® scores along with RVU scores over using the traditional
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`RVU scores alone to determine payments because QVU® scores compensate care providers for
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`value-based care tasks and therefore increases the amount of value-based care tasks being
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`completed. This increased quality outcomes benefits all, and adds value to QHI’s customers and
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`translates directly to increased sales of CareScreen® services by QHI.
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`18.
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`Another critical trade secret within CareScreen® is the business logic and source
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`code underlying the Encounter Form or Primary Care Form feature. The Primary Care Form is a
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`feature of CareScreen® that presents an industry leading checklist of physician services relevant
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`to each and every patient during patient encounters with care providers. CareScreen®’s Primary
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`Care Form features take patient information and apply QHI’s trade secret logic to recommend
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`certain physician tasks based on past and present patient conditions and treatments and
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`sometimes including real-time provider input. Much like retailers recommending other value
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`added or safety related products, features or enhancements to purchase when a potential buyer
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`places a product order; CareScreen® applies a proprietary algorithm to recommend other
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`provider tasks, including preventative medicine acts to improve patient outcomes (i.e., more
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`screening for cancer, diabetes, and depression). Bridging gaps between patient current and
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`historical conditions and recommended value-based care tasks to providers and tracking whether
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`providers perform these recommended tasks constitutes QHI’s trade secret. Keeping the logic
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`underlying its algorithm a secret provides QHI a unique product feature in the marketplace.
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`19.
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`Competitors to QHI would benefit from knowing the inner-workings of
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`CareScreen® services and, in particular, the workings of the QVU® systems and Primary Care
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`Form systems. QHI and its clients benefit from the output of these systems, and from the trade
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`secrets remaining secret with the methods underlying CareScreen® services and QVU® systems
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 6 of 32
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`residing in a “black box”. Uncovering the methods underlying these systems would provide
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`competitors a product feature that they could use in the marketplace to compete unfairly with
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`CareScreen® or, alternatively, disclosure of the methods underlying CareScreen® would destroy
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`its inherent value. Accordingly, the QVU® and Primary Care Form trade secrets have
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`independent economic value from not being known by QHI’s competitors.
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`20.
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`QHI’s perspective and actual customer lists and customer particular traits
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`contained in its customer databases also constitute its trade secrets. Competitors to QHI would
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`benefit from its perspective and actual customer information because it would provide “hot and
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`cold” leads for healthcare management software and the identities of QHI customers that actually
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`use healthcare management software. Access to this information provides a competitor the
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`ability to focus its marketing resources to target customers that are interested in its products and
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`avoiding the expenses incurred by QHI in developing those relationships. Accordingly, QHI’s
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`customer lists have independent economic value from not being known by QHI’s competitors.
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`21.
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`QHI’s perspective and actual investor lists also constitute its trade secrets.
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`Competitors to QHI would benefit from its perspective and actual investor lists because it would
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`provide “hot and cold” leads for healthcare management software investors. Access to this
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`information provides a competitor the ability to focus its marketing for potential funding sources
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`and avoid the expenses incurred by QHI in identifying or developing those relationships.
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`Accordingly, QHI’s investor lists have independent economic value from not being known by
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`QHI’s competitors.
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`22.
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`QHI’s pricing strategies, marketing strategies, cost structure, general business
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`operations, and financial information constitute its trade secrets. Competitors to QHI would
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`benefit from this information by learning its profit margins, marketing channels and marketing
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 7 of 32
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`methods that it has developed for its software product. Accordingly, this information has
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`independent economic value from not being known by QHI’s competitors.
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`23.
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`In sum, these trade secrets provide QHI a competitive and economic advantage
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`from being unknown to the public and, in particular, its competitors.
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`PROTECTING QHI TRADE SECRETS
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`24.
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`QHI has diligently protected its trade secrets, including CareScreen®, in multiple
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`ways.
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`25.
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`All employees that work for QHI are required to sign proprietary information
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`agreements. While these agreements have changed slightly over the years, the core elements of
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`the agreement require the following:
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`Employee recognizes and acknowledges that in the course of Employee's
`employment with the Company, it will be necessary for Employee to acquire
`confidential information belonging to the Company, its Affiliates or to third parties
`who are relying on the Company to maintain the confidentiality of information
`provided to the Company by them (“Confidential Information”). Employee shall
`use his best efforts not to disclose the Confidential Information to any person who,
`or entity that, is not an Affiliate. Employee shall not, directly or indirectly, for his
`own benefit, or for the benefit of any other person or entity other than an Affiliate,
`disclose, divulge, reveal or use any Confidential Information obtained directly or
`indirectly from the Company or any of its affiliates or customers, without the prior
`express written consent of the Company. Employee agrees that during his
`employment and at any time thereafter, regardless of the reason for the termination
`of the employment relationship, Employee will not disclose any Confidential
`Information of the Company, its Affiliates, business partners, vendors or customers.
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`26.
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`QHI’s proprietary information agreements with employees define “Confidential
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`Information” to include, among other things:
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`information concerning the Company’s and its Affiliates’ business, including, for
`example, information concerning: . . . (ii) customers, vendors and prospective
`customers, identity of customers, vendors and prospective customers or vendors,
`amount or nature of the Company’s or any of its Affiliates’ work for customers,
`customer lists and other customer information; . . . (vi) the identity of and terms of
`agreements with strategic business partners and prospective strategic business
`partners; (vii) computer programs, system documentation, related software
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 8 of 32
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`development, manuals, formulae, processes, methods, compositions, ideas,
`improvements, inventions or other confidential or proprietary information
`belonging to or licensed to the Company or any of its Affiliates or relating to the
`Company's or any of its Affiliates' affairs . . . ; and (ix) any trade secrets or similar
`information belonging to the Company.
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`27.
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`Upon resigning from QHI, employees are required to sign an acknowledgment
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`stating that the employee has returned all QHI property and reaffirming that he or she intends to
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`“preserve as confidential all trade secrets, confidential knowledge, data or other proprietary
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`information relating to products, processes, know-how, designs, formulas, developmental or
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`experimental work, computer programs, databases, other original works of authorship, customer
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`lists, business plans, financial information or other subject matter pertaining to any business of
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`[QHI] or any of its employees, clients, consultants or licensees.”
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`28.
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`In addition, when QHI provides perspective partners or customers access to
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`proprietary information, including product demonstrations of CareScreen®, it enters into a
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`Mutual Confidentiality and Non-Disclosure Agreement (“MNDA”). These MNDAs require that
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`each party “shall use the Confidential Information solely for their internal inspection and review
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`to evaluate the Potential Transaction” and also “shall not (a) use such information (i) for their
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`own business or personal purposes, or (ii) on behalf of any third party; or (b) distribute, transfer
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`or disclose such information in any way to any person or entity.” Confidential Information
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`includes “any confidential or proprietary information, technical data, or know-how, whether in
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`oral, written, or other tangible form, and whether designated as confidential or not (provided that
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`information not designated as confidential or provided orally shall be confirmed as confidential
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`in writing), and including but not limited to, product plans, products, services, customers,
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`markets, software, developments, processes, designs, research, development, marketing or
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`finances of the disclosing party.”
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`29.
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`QHI’s licensing agreements require that end users maintain the confidentiality of
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`QHI’s CareScreen® product. Specifically, those agreements provide:
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`Each party will (i) maintain any information, whether written or otherwise, related
`to the business and/or technology of the other party that it receives under this
`Agreement (collectively, “Confidential Information”) in strict confidence; and (ii)
`not disclose, use, transmit, inform or make available the Confidential Information
`to any entity or person.
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`30.
`
` QHI’s license agreements further provides that:
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`Customer and each Authorized User will not attempt to decompile, disassemble or
`reverse engineer any software included within, or otherwise attempt to discover any
`portion of the source code, logical scheme, methods, know-how, data, confidential
`information or trade secrets related to, the Platform or any related software or
`applications, whether to develop competitive or functionally similar software or
`services or for any other purpose, or permit any third party to do any of the
`foregoing. Customer agrees to not grant access to the Platform to any third party
`for any purpose without the without the prior written consent of QHI.
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`31.
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`In addition to these contractual agreements and limitations, QHI has corporate
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`policies restricting employees’ use and mandating employee protection of QHI confidential
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`information and trade secrets.
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`32.
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`QHI takes other steps to protect its proprietary information and trade secrets. For
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`example, QHI’s computer systems generally, and source code depositories specifically, are only
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`accessible through a password protected computer system, including by virtual private network.
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`Indeed, QHI’s source code depositories are limited to specific persons that “need to know” the
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`information. Access to QHI’s facilities requires a key fob and QHI has a camera security system
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`at its facility. QHI uses computer software to prevent extraction of QHI’s electronic data using
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`external media. QHI also has the ability to remotely “wipe” any laptops and smartphones of
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`business sensitive information.
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`33.
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`In sum, QHI uses multiple methods to protect its proprietary information and
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`trade secrets including physical, electronic, and contractual means.
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`THE INDIVIDUAL DEFENDANTS
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`KRAUS
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`In 2015, QHI hired its founders’ now son-in-law, Kraus, to be its President and
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`A.
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`34.
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`Chief Operating Officer. In that role, Kraus had responsibility to manage the day-to-day
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`operations of QHI, expand QHI’s customer base, and raise investment capital to assist QHI’s
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`expansion into different markets and business ventures. As COO, Kraus directly oversaw the
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`business development, marketing, finance, legal, human resources, business support, and project
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`management aspects of the business. With the lone exception of the CEO, every aspect of the
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`business reported to Kraus as President, including the Chief Technology Officer and Chief
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`Medical Officer, which was a requirement Kraus made of QHI for the benefit of his
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`employment.
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`35.
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`In his employment agreement, Kraus agreed that, as President and COO, he:
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`(i) shall devote substantially all of his business time and attention to
`providing services to the Company . . . ., (ii) shall be subject to, and comply
`with, the rules, practices and policies applicable to employees whether
`reflected in an employee handbook, code of conduct, compliance policy or
`otherwise, as the same may exist and be amended from time to time, of the
`Company . . . ; (iii) shall not engage in any business activities other than the
`performance of his duties under this Agreement, and (iv) shall not engage
`in any other employment, occupation or consulting activity for any direct or
`indirect remuneration, nor will he engage in any other activities that conflict
`with the business interests of the Company or any of its affiliates or related
`parties or other any Subject Entity or impede his performance of such duties
`without the express written approval of the Company.
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`36.
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`Kraus was also a member of the board of directors of QHI and its holding
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`
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`company, Quality Health Holding Company, LLC and a substantial shareholder. In that role,
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`Kraus had the responsibility to guide QHI’s strategic decisions and to advise QHI’s officers,
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`board, and owners of business development, investors, and contract opportunities, and he was
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`intimately aware of all current and future business opportunities and of current and potential
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`strategic partner investors.
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`37.
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`As a director and an employee, Kraus signed multiple agreements requiring the
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`protection of confidential information and trade secrets with terms the same as or substantially
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`similar to the terms applicable to all employees described above and forbidding Kraus from
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`using or disclosing QHI’s confidential information and trade secrets for any purpose other than
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`to benefit QHI. Upon information and belief, Kraus wrongfully took one of the employee
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`confidentiality agreements applicable to him from his employee file upon his departure. The
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`existence of the missing agreement is established by its reference in Kraus’ employment
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`agreement and his termination certificate described below.
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`38.
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`To accomplish his duties, from day one, QHI trusted Kraus and gave him access
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`to QHI’s proprietary and confidential information and trade secrets, including its customer lists,
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`investors lists, financial information (including profit and loss information), its business
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`operating system, and software code to help build and improve the company.
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`B. MENG
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`39.
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`Throughout his time at QHI, Kraus sought the assistance of his business school
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`friend, Meng. Initially, Kraus sought Meng’s expertise as a partner with a private equity firm to
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`assist QHI with certain business initiatives in its managed health care services business,
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`including for health maintenance organizations (“HMO(s)”), preferred provider organizations
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`(“PPO(s)”), and Accountable Care Organization (“ACO(s)”). Later, in or around July 2016, on
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`Kraus’ recommendation, QHI added Meng to its Board of Advisors and ultimately signed a term
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`sheet to be a strategic advisor to QHI.
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`40.
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`After Meng joined QHI’s board of advisors, he continued to assist Kraus with
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`finding additional financing for QHI’s growth plans and assisting with certain joint venture
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`negotiation activities, and with advising QHI investors about QHI related business opportunities.
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`41.
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`As a board advisor, QHI trusted Meng and gave him access to QHI’s confidential
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`information and trade secrets including contact with and knowledge of its actual and potential
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`investors, knowledge of its actual and potential customers, knowledge of QHI’s business plans,
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`and access to the workings of CareScreen® services and QVU® systems.
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`C. BRENNER
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`42.
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`In or around June 2016, Brenner joined QHI to be a Senior Associate reporting
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`directly to Kraus. Kraus brought Brenner onboard to help him with his fledgling new business
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`development efforts.
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`43.
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`Brenner signed employment agreements requiring the protection of confidential
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`information and trade secrets with terms the same as or substantially similar to the terms
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`applicable to all employees described above and forbidding Brenner from using or disclosing
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`QHI’s confidential information and trade secrets for any purpose other than to benefit QHI.
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`Upon information and belief, Kraus wrongfully took Brenner’s employment agreements from
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`Brenner’s employee file upon their departure. The existence of the missing agreement is
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`established by its reference in Brenner’s termination certificate described below.
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`44.
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`As an employee, and in service of Kraus, QHI trusted Brenner and gave him
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`access to QHI’s proprietary and confidential information and trade secrets, including its
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`customer lists, its business operating system, and software code to help build and improve the
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`company.
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`D. DUBIN
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`45.
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`In February 2017, QHI hired Dubin to be its Chief Medical Director. In that role,
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`Dubin helped with certain aspects of QHI’s product development, certain aspects of QHI’s
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`consulting business, but was also responsible for developing new business for QHI in part
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`through his relationships with and knowledge of regional physician practices, independent
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`provider associations (“IPA(s)”), hospital systems and health plans.
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`46.
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`Dubin signed employment agreements requiring the protection of confidential
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`information and trade secrets with terms the same as or substantially similar to the terms
`
`applicable to all employees described above and forbidding Dubin from using or disclosing
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`QHI’s confidential information and trade secrets for any purpose other than to benefit QHI.
`
`47.
`
`Dubin also agreed that he:
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`(i) shall devote substantially all of his business time and attention to
`providing services to the Company . . . , (ii) shall be subject to, and comply
`with, the rules, practices and policies applicable to employees whether
`reflected in an employee handbook, code of conduct, compliance policy or
`otherwise, as the same may exist and be amended from time to time, of the
`Company . . . ; (iii) shall not engage in any business activities other than the
`performance of his duties under this Agreement, and (iv) shall not engage
`in any other employment, occupation or consulting activity for any direct or
`indirect remuneration, nor will he engage in any other activities that conflict
`with the business interests of the Company or any of its affiliates or related
`parties or other any Subject Entity or impede his performance of such duties
`without the express written approval of the Company.
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`Dubin also signed a series of restrictive covenants in connection with his
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`48.
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`employment, including a non-competition clause, a non-solicitation of QHI’s customer’s clause,
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`and a non-solicitation of QHI’s employees clause.
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`49.
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`Dubin’s non-compete restrictive covenant, as modified, provided that, for 365
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`days following his termination, he “shall not, directly or indirectly, engage in or compete with
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`the Company Business” in any jurisdiction where QHI “operated, conducted business, or sold or
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 14 of 32
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`distributed software, devices or other tools [(the ‘Restricted Territory’’)].” “Company Business”
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`in Dubin’s employment agreement means “the design, development, implementation, and/or
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`operation of medical-related software and/or clinical support services to improve quality of care
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`and/or reduce medical expenses, including, but not limited to, (i) reducing in-hospital and
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`nursing facility days and facilitating effective preventative care, and (ii) optimizing payment to
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`healthcare providers and health plans”; and “any other line of business which the Company or
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`any of its Affiliates engaged in, or actively planned to engage in, during the term of Employee’s
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`employment in which Employee assisted in any material way.”
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`50.
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`Dubin’s non-solicit of customers restrictive covenant provided that for 2 years he
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`shall not:
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`anywhere within the Restricted Territory, directly or indirectly solicit or
`contact (including but not limited to e-mail, regular mail, telephone, fax,
`instant message, and social media) any customer, prospective customer,
`strategic partner, or prospective strategic partner of the Company or any of
`its Affiliates, with whom Employee had dealt, called upon, solicited, sold
`to, or purchased from, either personally or through co-employees that
`Employee supervised, for the purpose of offering or accepting goods or
`services similar to or competitive with those offered by the Company or any
`of its Affiliates.
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`51.
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`Dubin’s non-solicit of employees restrictive covenant provided that for 2 years he
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`
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`shall not:
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`within the Restricted Territory, directly or indirectly solicit or induce, or
`attempt to solicit or induce, any employee of the Company or any of its
`Affiliates to leave the Company or any of its Affiliates for any reason
`whatsoever, or hire any person who is then an Employee of the Company or
`any Affiliate.
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`Each is the restrictive covenant periods is tolled and “shall be extended by the
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`52.
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`length of time during which Employee shall have been in breach of any of those provisions.”
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`
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`14
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 15 of 32
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`D. POOR PERFORMANCE; SUSPICIOUS ACTS
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`53. Meng and Kraus proved to be an ineffective team at finding investors for QHI,
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`which, as described below, is because they were saving any investors they did find for their own
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`future business venture, Stellar Health.
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`54.
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`Kraus, Brenner, and Dubin proved to be an ineffective team at producing new
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`business for QHI. Upon information and belief, Kraus, Brenner, and Dubin were purposefully
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`not producing new business for QHI and saving opportunities for a future business venture,
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`Stellar Health. As described below, Stellar Health’s first customer was an entity Kraus originally
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`pursued on behalf of QHI.
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`55. What Kraus and Brenner were good at was learning the details of CareScreen®.
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`Throughout 2017, Kraus and Brenner would hold special meetings with QHI computer
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`programmers to learn the details of CareScreen®. Brenner in particular asked for and was given
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`the minutia level details of CareScreen®, beyond what was required of his employment, and
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`built spreadsheets to understand the logic and calculations underlying the software. The obvious
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`purpose of these meetings, in retrospect, was to be able to learn the trade secrets underlying
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`CareScreen® and use them in a competing business.
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`THE INTENDED DESTRUCTION
`OF QHI AND FORMATION OF STELLAR HEALTH
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`56.
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`Eventually, after accumulating the information they needed, the Individual
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`Defendants began developing Stellar Health and abandoned QHI. Upon information and belief,
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`the Individual Defendants thought QHI would fail after they departed.
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`57.
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`Knowing his time with QHI was coming to a close, in November 2017, Kraus
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`rejected taking a meeting with a potential investor that he and Meng previously pursued on
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`QHI’s behalf. Specifically, he falsely represented that QHI was not interested in getting
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`
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`15
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`Case 3:20-cv-01886 Document 1 Filed 12/18/20 Page 16 of 32
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`“institutional growth capital” in favor of its “slower more conservative path with [QHI’s]
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`existing investor.” At no time prior to his departure did Kraus present this opportunity to QHI or
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`recant his false statements.
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`58.
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`Kraus further stated to the investor that “there may be other things cooking in the
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`future that [Kraus, Meng, and the investor] can work together on.” That other future venture was
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`Stellar Health.
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`59.
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`In November 2017, while purportedly continuing to work for QHI, Meng and
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`Kraus exchanged emails containing a pitch deck for Stellar Health.
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`60.
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`In early December 2017, prior to Kraus’ departure, Kraus, Meng, and Brenner
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`started exchanging a Stellar Health mission statement to “increase[] [payer] profitability by
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`improving Quality and Medical Loss Ratio via unique primary care empowerment.” QHI shares
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`this mission statement.
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`61.
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`In or around December 19, 2017, Kraus left QHI to implement their plan and
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`formally setup Stellar Health, a direct competitor, and to effectuate the demise of QHI.
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`Remarkably, Kraus intentionally made the false representation to QHI that he did not intend to
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`compete with