MIAMI, FL– June 23, 2021- Bast Amron attorneys have successfully settled claims that brought $1.4 million into the assignment estate of CareSync, Inc., for distribution to creditors. Following two years of investigation and litigation of claims, Bast Amron attorneys Brett M. Amron, Dana Quick, Peter J. Klock, II, and paralegal Nakeisha Jones secured a settlement agreement on claims alleged against CareSync’s former officers and directors for, among other things, breaches of their fiduciary duties. In addition to bringing funds into the estate, the settlement agreement eliminated $7.6 million in claims – comprised of claims filed individually by CareSync’s former officers and directors and claims filed by certain equity funds, which funds some of the directors represented on the Board. The Bast Amron team was special litigation counsel to Joseph J. Luzinski of Development Specialists, Inc., the Assignee in the Assignment for the Benefit of Creditors of CareSync, Inc. Mr. Luzinski is also represented by Stephanie Lieb of Trenam Law, who is general counsel to the Assignee.
CareSync, a Delaware corporation headquartered in Tampa, FL, was a healthcare technology company with a checkered past that included a grand jury investigation surrounding the funding and oversight of a $7.25 million public grant it received from Hardee County to encourage the growth of technology jobs – and all of which was spent by CareSync’s predecessor entity before it had a product to sell. Later, once CareSync had a product – a direct-to-consumer electronic medical record website – it failed to attract customers willing to pay up to $200 per year for access to their own medical records. CareSync then wildly swung to an entirely different approach – a business-to-business provider of outsourced chronic care management for hospitals and medical practices. Under this model, CareSync’s growth continuously outstripped its revenues, with management believing that if they built it, customers would come. Indeed, up until days before shutting down, CareSync was continuing to grow its workforce. Shortly before assigning its assets to the Assignee, CareSync abruptly closed its doors, leaving more than 300 employees jobless without notice.
The Bast Amron team conducted a complete post-mortem examination of CareSync’s operations, ultimately bringing claims against CareSync’s officers and directors. In litigation, the directors and officers sought to dismiss the Complaint, arguing the Florida court was an improper venue for the cause of action based upon CareSync’s articles of incorporation, which stated that absent corporate consent, CareSync, and its officers and directors could only be sued in Delaware. As statutory Assignee of CareSync, the Bast Amron team successfully argued that Mr. Luzinski had the power and ability to consent to bring the director and officer liability claims in Hillsborough County. The directors and officers appealed that ruling to the Second District Court of Appeals, which affirmed the trial court’s order and provided an opinion mirroring the analysis of the Assignee’s brief.
The parties engaged in a mediation in December 2020, later resulting a settlement. The settlement was reviewed and approved by The Honorable Darren D. Farfante in April 2021.
Assignment Case: In re Assignment for the Benefit of CareSync, Inc.
Assignment Case Number: Case No. 18-CA-007069, pending in the Complex Business Division of the 13th Judicial Circuit Court in and for Hillsborough County.
Assignment Case Filing Date: July 23, 2018
Assignment Case Judge: Darren D. Farfante, Complex Business Division, 13th Circuit Court
Director & Officer Liability Case: Joseph J. Luzinski, as Assignee, v. Travis Bond, Lisa Bond, Joy Powell, Amy Gleason, Karen Gittens, Allison Guley, Mano Kalathil, Robert Crutchfield, John Tullis, Ian Sigalow, Joel Krikston, Ashok Subramanian, Douglas Free, David Leffell, and Ruben King-Shaw.
Director & Officer Case Number: Case No. 20-CA-001233, Supplemental Proceeding, pending in the Complex Business Division of the 13th Judicial Circuit Court in and for Hillsborough County.
Case No. 2D20-1510, in the District Court of Appeal of Florida, Second District.
Director & Officer Filing Date: February 7, 2020
Director & Officer Judge: Darren D. Farfante, Complex Business Division, 13th Circuit Court
Director & Officer Appellate Panel: Justices Daniel H. Sleet, Edward C. LaRose, Andrea Teves Smith
Plaintiff’s attorneys: Brett M. Amron, Dana R. Quick, Peter J. Klock, II
Defendants attorneys: Jonathan Vine, Daryl Greenberg, and Scott Cole of Cole, Scott & Kissane, P.A.; and Robin Taylor Symons and Jocelyn Ramos of Gordon Rees Scully Mansukhanis
Details: CareSync, a Delaware corporation headquartered in Tampa, FL, was formed by Travis Bond in 2014 through merger with Continuum Labs, Inc. CareSync’s original business plan was to develop a website that would permit patients to access their electronic medical records (“EMR”) for a fee. CareSync wooed investors by providing them with astronomical and unrealistic projections wherein CareSync’s management “projected” the company would go from $0 in annual revenue to up to $160,000,000 in annual revenue in only two years’ time. In fact, in 2014, its first year of providing EMR services, CareSync generated only $6,074 in revenue while spending over $1,000,000 in operating expenses.
In 2015, CareSync’s officers upended the company’s business model to one of a business-to-business provider of chronic care management (“CCM”) on behalf of hospitals and doctor’s offices, which had a host of entirely different obligations and needs than the EMR model needed – including the need to have clinical staff available to field calls 24/7. Again, CareSync’s officers wooed investors with astronomical projections that stated CareSync would generate $3,000,000 in revenues in 2015 (its first year operating under this model) and $87,400,00 by year-end 2016. Again, CareSync never achieved anything close to these results, with 2015 revenues at little more than $1,000,000 and 2016 revenues at $6,900,000 – less than 8% of the projections made for 2016 (meanwhile, spending in 2016 topped $18,000,000).
CareSync was able to raise – and spend – over $50,000,000. Despite a last-ditch effort to sell the company in June 2018, for $1 to Bill Smith of Shipt, Smith walked away from the transaction despite having already loaned the company $1,000,000 that same month. Ultimately, CareSync terminated all 300 of its employees on a single day and assigned its assets to Assignee Joseph Luzinski. Luzinski now oversees the assignment estate, which has received claims of more than $15,000,000, not including investor claims. Luzinski was only able to generate $1,000,000 for the sale of CareSync’s assets. Luzinski hired Bast Amron as special litigation counsel to investigate and prosecute director and officer liability claims.
Plaintiff’s Case: The Assignee alleged the officers of CareSync, which included Travis Bond (founder and CEO), Lisa Bond (Executive Vice President of Products), Joy Powell (COO), Amy Gleason (CSO), Karen Gittens (CFO), Allison Guley (General Counsel and CLO), Mano Kalathil (CTO), and Robert Crutchfield (Interim CEO) breached their fiduciary duties to CareSync by failing to impose sufficient controls over CareSync’s financial and business operations, burdening CareSync with too much debt with no legitimate plan to reach profitability, and failing to mitigate or remedy known problems at CareSync. The Assignee also alleged the Directors, which included Travis Bond, Lisa Bond (Secretary of Board), Joy Powell (President of Board), Robert Crutchfield (Chairman of Board, who held his seat representing Harbert Venture Partners III, L.P.), John Tullis (who held his seat representing Tullis Growth Funds, L.P.), Ian Sigalow (who held his seat representing Greycroft Partners III, L.P.), Joel Krikston (who held his seat representing Merck Global Health Innovation Fund, LLC), Ashok Subramanian, Douglas Free, David Leffell, and Ruben King-Shaw breached their duties to CareSync by failing to require management to impose sufficient controls, allowing CareSync to continue to incur additional debt with no real plan to reach profitability, failing to mitigate known problems at CareSync, and failing to make necessary changes in management in a reasonable time frame.
Defendant’s Case: Defendants initially sought to dismiss the case for improper venue, arguing instead that the case should be brought in Delaware. The trial court denied this request, and upon appeal, the Court of Appeals affirmed. Defendants denied all substantive allegations of the complaint and denied any breaches of fiduciary duty. The Defendants alleged that their actions were protected by the application of the business judgment rule, the exculpation clause contained in the Articles of Incorporation and because the Defendants allegedly were not the proximate cause of damages to CareSync.
Outcome: In December 2020, after conducting document discovery, including discovery from third parties, the parties engaged in mediation. In January 2021, the parties were able to reach a resolution of the Assignee’s claims, which included payment of $1,400,000 in funds into the assignment estate for the benefit of CareSync’s creditors. Additionally, the Assignee obtained a waiver of the proofs of claim filed by the Defendants individually, of which their claims totaled $719,721.38. In exchange, the Assignee and Defendants waived any and all existing claims between them. Further, several of the Board members served on the Board as representatives of investing equity firms. As part of the settlement, the Assignee obtained waivers of filed claims from Tullis Growth Funds, L.P., Harbert Venture Partners III, L.P., Greycroft Partners III, L.P., and Merck Global Health Innovation Fund, LLC, totaling $6,905,672.33. In exchange for their claim waivers, the equity funds and the Assignee waived any and all existing claims between them.
The settlement not only brings significant funds into the estate for payment to CareSync’s creditors but adds value by shrinking the pool of creditors to be paid by over $7,600,000.