ACCEPTED
04-15-00427-CV
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
8/17/2015 6:58:46 PM
KEITH HOTTLE
CLERK
NO. 04-15-00427-CV
FILED IN
IN THE 4th COURT OF APPEALS
SAN ANTONIO, TEXAS
COURT OF APPEALS FOR THE 08/17/2015 6:58:46 PM
FOURTH COURT OF APPEALS D
KEITH E. HOTTLE
ISTRICT Clerk
SAN ANTONIO, TEXAS
______________
CRAWFORD MEDICAL SUPPLIES, LLC, SAM MADDALI, PREM SWAROOP
KALIDINDI, AND MADDALI REALTY, LLC
APPELLANTS
VERSUS
HUNTLEIGH HOME MEDICAL, LTD. AND JANE ELIZABETH FLORES
APPELLEES
______________
APPEAL FROM THE 57TH JUDICIAL DISTRICT COURT, BEXAR COUNTY, TEXAS
NO. 2013-CI-00404
APPENDIX TO BRIEF OF APPELLANTS
PULMAN, CAPPUCCIO, PULLEN, BENSON & JONES, LLP
Elliott S. Cappuccio
Texas State Bar No. 24008419
Leslie Sara Hyman
Texas State Bar No. 00798274
Etan Z. Tepperman
Texas State Bar No. 24088515
2161 NW Military Highway, Suite 400
San Antonio, Texas 78213
(210) 222-9494 (Telephone)
(210) 892-1610 (Facsimile)
Attorneys for Appellants
APPELLANTS REQUEST ORAL ARGUMENT
TABLE OF CONTENTS
Document Tab
June 16, 2015 Order Granting in Part and Denying in Part
Defendants’ Plea in Abatement and Motion to Compel Arbitration ......................... 1
Operating Agreement .................................................................................................2
Plaintiffs’ Third Amended Petition ............................................................................3
Tab 1
DOCUMENT SCANNED AS FILED
2013CI00404 -0057
'"~.- - -·- ·· - --...---·
CAUSE No. 2013-CI-00404
HUNTLEIGH HOME MEDICAL, LTD., § IN THE DISTRICT COURT
JANE ELIZABETH FLORES, AND §
MICHAEL FLORES, §
§
PLAINTIFFS §
§
v. § 57m JUDICIAL DISTRICT
§
CRAWFORD MEDICAL SUPPLIES, LLC, §
SAM MADDALI, PREM SWAROOP KALIDINDI, §
AND MADDALI REALTY, LLC, §
§
DEFENDANTS § BEXAR COUNTY, TEXAS
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' PLEA IN ABATEMENT AND MOTION TO COMPEL ARBITRATION
On this date the Court considered Defendants' Plea in Abatement and Motion to Compel
Arbitration. After careful consideration of the motion and Plaintiffs' response, and having taken
judicial notice of Plaintiffs' Second and Third Amended Petitions, the Court is of the opinion
that the motion should be granted in part and denied in part.
Accordingly, it is hereby ORDERED that Defendants' Plea in Abatement and Motion to
Compel Arbitration is GRANTED IN PART such that, consistent with the Court's Order dated
August 30, 2013, any claims by and against Michael Flores that arise out of or relate to his
employment agreement with Crawford Huntleigh Medical Supplies, LLC nlk/a Crawford
Medical Supplies, LLC shall be decided in arbitration and this lawsuit is abated and stayed
pending arbitration only as to such claims.
p
G
lr."
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DOCUMENT SCANNED AS FILED
It is further ORDERED that Defendants' Plea in Abatement and Motion to Compel
Arbitration is in all other respects DENIED.
SIGNED AND ENTERED this ~day of June, 2015.
APPROVED AS TO FORM:
ecappuccio@pulmanlaw.com
Leslie Sara Hyman
Texas State Bar No. 00798274
lhyman@pulmanlaw.com
PULMAN, CAPPUCCIO,
PULLEN, BENSON & JONES, LLP
2161 NW Military Highway, Suite 400
San Antonio, Texas 78213
www .pulmanlaw.com
(21 0) 222-9494 Telephone
(210) 892-1610 Facsimile
8/ ATTORNEYS FOR DEFENDANTS
1
7
/
61 tv\~~.L . '
5
Mark Murph)TO(j U~
v State Bar No. 24002667
0 DAVIS & SANTOS
L Attorneys & Counselors, P.C.
4 112 E. Pecan Street, Suite 900
4 San Antonio, Texas 78205
~~ Telephone: (210) 853-5882
Facsimile: (210) 200-8395
g ATTORNEYS FOR PLAINTIFFS
1
5
7
7 571
2
Tab 2
OPERATING AGREEME:NT
OF
CRAWFORU BUNTLEIGHMEDICAL -SUFPLlES, LLC
A TEXAS LIMITEDLIABI':LITY-COMl>ANY
' . '.- - ·- . -
THIS QP'BRATJNO, AGREeMENt c·Agreement'~) is m?de a.s of t}lis L' 2~
day of
Dc;:cember, 401 1 by ~pd -a!}.19J1& P-REM: SWAROOP KALlDINDI {"Kalidim:U)))? an .indlvidttal
having an address at 171 :Foiesf Drive, Piscataway:~ New Jersey .(}88.5.4, ANNAPURNA
MADOALI ("Miany other hus)ness tii1Jess related .to
the ~usi:nesS', unless appl:oved as provid~· beto~v.
NOW THER,EFQR,E, it1 cons1Q.~ra:tiO~t>:ft4e ¢utual'pKeq1ise~.:helow,:,anc\ othe(goo_d and
valuable Gonsidetariou receipt and :suffici'ency of whicl). l_s' h~teby -a9.knowledg~d, th~ Membe.rs
hereby ag~:ee as follows:
ARTICLEl. DEFINITIONS
Sectior'l l.Oi Definitions, Tf}e· felloWitig. t'~tn'is used in thi$ Agt:eemtmt have the~ n1eaniugs
specifi~d in tliis_Art·id~ -orelsec\Yhet~in f~ Agt1eei.nehf. ·
(~) "Act" m.eans, the Title .3 ot; th~ T~X:as BusitJesS
Qrga!lf;za.tfons Act~ ·whi¢h pettains;}q the fotl}J~frqg .a.!Jd-ope1·ation 9f
limited: liability .cofupan1es, includhl.g ai.ilendmeitts thereto .frOJil time
to .,ti.ffie~
(b) ''Agceement" means tl1iS: opei·ating agreement~ -as:
origlnally execiifed and a~ am~ndGd fr\im tfrne to lime.
1
505
(c) "Assignee11 means a person who has acquired a
Member's Economic lnterest in the Company, by way of a Transfer in
accordance witb the tenns of tbjs Agreement, but who has not become
a Member.
(d) "Assigning Member11 means a Member who by
means of a Transfer has transferred an Economic h1terest in the
Companiy to an Assiguee.
(e) "Business" means the sale of home medical
supplies and durable medical equipment.
(f) "Capital Account" means, as to any Member, a
separate account maintajned and adjusted in accordance with Section
3.02.
(g) "Capital Contribution" means, vr.rith respect to any
MembeJ:, the amot!nt of the money, the forgiveness of any debt, and
the Fair Market Value of any services or property (other than money)
contributed to the Company (net of liabilities secured by such
contributed property that the Company is considered to assume or take
"subject to 11 under IRC section 752) in consideration of a Percentage
Intefest held by such Member. A Capital Contribution shall not be
deemed a loan.
Q1) "Capital Event'' means a sale or disposition of any
of the Company's capital assets, the receipt of insurance and other
pmceed:s derived from the voluntary or involuntary conversion of
Company property~ the receipt of proceeds from a refinancing of
Compar!y property, or a similar event with respect to Company
pmperty or assets.
(i) "Cet1ificate of Formation" means the document
required! t.o be filed with the applicable office of the state of Texas to
establish a limited liability company in Texas.
G) "Code" m "IRC" means the Internal Revenue Code
of l986, as amended, and any successor provision.
(k) "Company'' and/or "LLC" means the company
named in Section 2.02.
(1) ''Contributing Member" is defined m Section
3.03(a).
(m) "Economic Interest" means a Persall's right to share
in the income, gains, losses, deductions, credit or similar items o4 and
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506
to req~iv'~ distributio!l~ from, the, Co~:np_~y, but dbes not inqhtde any
other tights of.a Met).!ber) including tlre right to vote·or to participate in
management.
(u} •rE1i1ployment Agi·eeihent'' means the employment
agreement clated Decembe1· __, 20li benveen the Company~ as
employer, an:d.lvticb(!el D_avid Flores, as ·en1.ployee.
(o} 1 ~Eneumber" means .the a~l of creating or pmpOJting
to -creare! an· Enc~m~rance, wheilier ot not p~rfected under applicable
law.
(p) "Encumbrance" means, with T.espect te any
Membership liitetest,_ or any element thereof, .a n1ortgage, pledge~
security interest, lien, proxy coupled w.i1h ·an interest (other than as
GOOiemplated in thl~: ·f..gr~emt:;nt); optio;n, o.r preferentiaf tight to
pUfC:hase:.
1
(q), "F.ai_~ 1yfa~ket Val:\11~ ' means, witb. respect to any
itetn. of propetty ef.the Company. the--i{eni's adjusted. basis for federal
income tax purposes', exc.ept as-follows;
The EC!.it Mru·]:(¢t Vah1~ of ~llY prope1ty cont1iliuted
(i)
by a Member to the-Company shalf be the--valtle of such ptopeJ.ty~ as ~ittqally agt'eed by
the contributing Member and the Company; · -
(ii) The Fair Market Vatu~ of any- itern of C caused by the failme to make such Capital Con11·ibution. The
remaining Members shall have the right to own the defaulting Members interest in percentage to
their interest in the Company.
Section 3.03 Capital Call. Subject to Section 3.04, upon an affirmative vote of by a
St1pennajority of the Members, the Members shall contribute to the capital ofthe Company fi'om
time to time and in prop01tion to their respective percentage Membership Interests in the
Company~ such sums of money as shall have been detetmined by the Members to be necessary in
order to pay the debts and obligations of the Company as the same become due and payable, to
make necessary capital improvement, and to prudently operate the Company's business. Each
Member shall be severalty obligated to the Company for such Member's proporHonate share of
the contributions to be made by the Members, and a contribution by a Member shall be made
upon request being made therefore by the Company as described in this Section 3.03. A Member
shall be in default of such Member's obHgation to make additional Capital Contribution under
this Section 3.03 (a "Non-Contributing Member") if (i) the Non-Contributing Men1ber fails or
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510
refuses to fund such Member's share of tb.e additional cash required by the Company within ten
days after delivery of the written capital call notice l'equired under this Section 3.03,and (ii) the
Non-Contributing Member fruls or refuses to cure such default within five days after written
notice of the failure is delivered (or deemed to have been delivered) by any Member who has
satisfied such Member's obligation to make additional Capital Contdbutions with respect to the
capital called and being funded (a "Contributing Member"). lf a Non-Contributing Member is in
default on such Member's obligation to make additional Capital Contributions, the exclusjve
remedy shall be that the Contributing Members may, but shall not be obligated to, exercise, by
delivery of written notice to that effect to the Non-Contributing Member, the followjng actions
or remedies from the failure of the Non-Contributing Member to make such Member's requited
additional Capital Contributions:
(a) any Contributing Member may advance to the
Company the Non-Contributing Member's proportionate share (in
proportion to the relative Membership Intetests of all Contributing
Members, or sncb other proportion as may be agreed by such
Members) of the defaulted amount on the following terms:
(i) the advance shall constitute a loan by the
Contributing Member to the Non-Contributing Members, which loan is used by the
Non-Contributit1g Member to make such Member's additional Capital Contribution to
the Company.
(ii) the amount loaned shall bear interest at a rate of
interest equal to the prime rate of interest as published in The Wall Street Journal from
time to time (the "Prime Rate") plus two percent (2%) per annum (or the maximum rate
pel'mitted by applicable law, if less) from the day the advance is made utltil the Joan,
together with all interest accmed thereon, is repaid to the Contributing Member;
(iii) aU distributions from the Company that otherwise
would be made to the Non-Contributing Member shall instead be paid to the
Contributing Member until the loan ~nd all interest accrued shall have been repaid in
full; and
(iv) upon making the advance to the Company, the
Contributjng Member shall have a co1Hinuing security interest, which is hereby granted
by each Member to the extent such Member becomes a Non-Contributing Membet·, in
the Non-Contributing Member's Membersrup Interest, now owned and hereafter
acquired, and the Contributing Member shall be entitled to all the rights and remedies of
a secln·ed pa11y tmderthe Te:xas Uniform Commercial Code; or
(b) Any Contributing Member may tnake an additional
Capital Contribution to the Company in an am01mt up to such
Member's prop01tionate share (in proportion to the relative
Membership Interests of all Lending Members and Coniributing
Members, or such other proportion as may be agreed by such
Members) of the defaulted amount, ill which event (i) the Membership
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511
Interest of the Contributing Member shall be increased to that
percentage which equals such Member's total Capital Contribution
divided by the total Capital Contributions made by all Members to
date, and (ii) the Membership interest of the Non-Contributing
Member shall be correspondingly decreased.
(c) In connection with any advances made by
Contributing Members under Section 3.03, this Agreement shall
constitnte a security agreement fol' purposes of the Unifonn
Conuncrcial Code. Each Member, to the extent he becomes a Non-
Contributing Membet, hereby agrees to execute !U1d deliver to each
Contributing Member such Uniform Commercial code financing
statements as the Contributing MembcJ: may l'equest from time to time
coverin~: the security interest created hereunder. The Contributing
Membet shall be entiHed to record such financing statements (or
photocoJpies thereof) for the purposes of perfecting the security
interests created hereunder and pt'oviding public notice thereof.
Section 3.04 Capital Call Option. Notwithstanding the provisions of Section 3.03, any
Member shall have the right to dedare a Capital Call to the Company upon the occurrence of any
of the following:
(a) default of a Joan, contract or agreement, where the
liquidahld amount to satisfY the debt is in excess of $15,000 provided
there ate~ insufficient funds in the working capital fund;
(b) the filing or imminent threat of a filing of mortgage
or lien foreclostu·e, tax lien, litigation, judgment, summary
disposse:ssion or eviction proceeding affecting the business premises of
the Company, replevin proceeding, involuntary Chapter 7 Bankruptcy
petitio.n, against the Company or any of the Company's assets; or
(c) default of any loan, contract or agreement that has
been personally guaranteed by any Member or its principals.
Section 3.05 Capital Accounts. An individual Capital Account shall be maintained for each
Member consisting of that Membl~r·s Capital Contl'ibution, (1) in.creased by that Member's share
of Profits, (2) decreased by that Member's share of Losses, and (3) adjusted as reqt1ired in
accordance with applicable provis.ions ofthe Code and Regulations.
Section 3.06 No Withdrawals of Capital Contribution. A Member shall not be entitled to
withdraw any part of th.e Member's Capital Contribution or to receive any distributions, whether
of money or property fi·om the Company, except as provided in this Agreement.
Section 3.07 No Interest. No interest shall be paid on funds or property contribllted to the
capital of the Company or on the balance of a Member's Capital Account.
Section3.08 No Personal LiabiJity. A Member shall not be bound by, nor be personally Hable
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512
for, the expenses, liabilities, or obligations of the Company, except as otherwise pJ'ovided in the
Act, in this Agreement, or in a separate written agreement executed by such Member.
Section 3.09 No Priority. Except as set forth otherwise, no Member shaH have priority over
any other Member with respect to the return of a Capital Contribution, or distributions or
allocations of income, gain, losses, deductions, credits, or items thereof
ARTICLE IV. ALLOCATIONS AND DISTRIBUTIONS
Section 4.01 Rese1·ves. Subject to maintaining the Company in a sound financial and cash
position (which. without limiting the generality of the foregoing, shall include the provision for
losses affecting the cash position of the Company and the payment or provision for payment,
when due, of obligations of the Company) and establishing such Reserves as aro dete1mined by a
Majority of the Members, in their reasonable discretion, the Company shall distribute funds to
the Members as provided herein.
Section 4.02 Allocations. The Profits and Losses of the Company and all items of Company
income, gain, loss, deduction, or credit shall be allocated, for Company book purposes and tot·
tax purposes, to each Member in accordance with their MembershijJ Interests. If any Member
unexpectedly receives any adjustment, allocation, or distribution described in Reg. sections
l.704-l (b)(2)(ii)(d)(4), 1.704-l (b)(2)(ii)(d)(S)) or 1.704-1 (b)(2)(ii)(d)(6), as same may be
amended from time to time, or tlnder any successor statutes thereof, items of Company gross
income and gain shall be specially allocated to that Member in au amow1t and manner sufficient
to eliminate any deficit balance in the Member's Capital Account cteated by such adjustment,
allocation, or distribution as quickly as possible. Any special allocation under this Section 4.02
shall be taken into account in computing subsequent· allocations of Profits and Losses so that the
net amount of allocations of income and loss and all other items shall, to the extent possible, be
equal to the net amount that would have been allocated if the unexpected adjustment, allocation,
or distribution had not occurred. The provisions of this Section 4.02 and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to comply with Reg
sections 1.704-1(b) and 1.704-2, as same may be amended from time to time, or under any
successor regulations thereof, and shall be interpreted and applied in a manner consistent with
such Regulations.
Section 4.03 Um·ealizcd Appteciation!Depa•eciation. Any umealized appreciation or
um·ealized depreciation in the values of Company property distributed in kind to all the Members
shall be deemed to be Profits or Losses realized by the Company immediately prior to the
distribution of the property, and such Profits or Losses shall be allocated to the Members' Capital
Accotmts in the same proportions as Profits are allocated under Section 4.01. Any property so
distributed shall be treated as a distribution to the Members to the extent of the Fair Market
Value of tbe property Jess the amount of any liability secured by and related to the prope1ty.
Nothing contained in this Agreement is intended to treat or cause such distributions to be treated
as sales for value. For the purposes of this Section 4.03, "unrealized appreciation" or "unrealized
depreciation" shall mean the difference between the Fair Market Value of such property and the
Company's basis for such property.
Section 4.04 Transfer of Interest. 1n the case of a Trattsfer of an Economic Interest during
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513
any fiscal year1 the Assigning Member and Assignee shall each be allocated a share of Pt·ofits or
Losses based on the number of days each held r.he Economic Interest dming that fiscal year.
Section 4.05 Operating Profits. Except as set forth otherwise~ cash resulting from the normal
business operations of the Company and from a Capital Event shall be distributed among the
Members at least each fiscal quarter, after accounting for reasonable reserves under Section 4.01 ,
in prop01tion to each Member's Percentage Interest. Without limiting the foregoing, provided
there are sufficient proceeds, each Member shall receive distributions necessary to satisfy their
respective tax obligations for any income realized from the Company.
Section 4.06 Non-cash Proceeds. If the proceeds from a sale or other disposition of an item of
the Company consists of propetty other than cash, the value of such property shall be as
determined by the Members. Such non-cash proceeds shall then be allocated among all the
Members in proportion to their Percentage Interests. If such non-cash proceeds are subsequently
reduced to cash, such cash shall be distributed to each Member in accordance with Section 4.0 1.
Section 4.07 Liquidation Distributions. Notwithstanding any other provisions of this
Agreement to the contraty, when there is a distribution in liquidation of the Company, or when
any Member's interest is liquidated, all items of income and loss flrst shall be allocated to the
Members' Capital Accounts under this ARTiCLE IV, and other credits and deductions to tl1c
Members' Capital Accounts, shall be made before the final distribution is made. The fmal
disttibution to the Membel'S shall be made to the Members to the extent of and in proportion to
their positive Capital AccOtmt balances.
Section 4.08 Guaranteed Payments to Obdulia, LLC. Notwithstanding anything to the
contrary, the Company shall make the following guaranteed payments to Obdulia~ LLC:
(a) No later than January 31, 2013, the Company shall
make a guaranteed payment to Obdulia, LLC in the sum of$130,000 if
the Gross Receipts for the calendar year 2012, equals or exceed
$2,000,000.
(b) No later than January 31, 2014, the Company shall
make a guaranteed payment to Obdulia, LLC in the sum of $130,000 if
the Gross Receipts for the calendar year 2013 equals or exceeds
$3,000,000.
(c) "Gross Receipts'~ as used in this Section 4.08 means
actual funds received by the Company fi·om jts operations and ol'dinal'y
course of business dming the pertinent time period. calculated on a
cash basis. Gross Receipts shall not include receipt of funds from non-
operating activities such as loans and investment income.
ARTICLE V. MANAGEMENT AND OPERATIONS
Section 5.01 Managing Member. For so long as it constittttes a Majority of the Members, the
following shall serve as the Managing Member:
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ANNAPURNA MADDALI
Section 5.02 Company's Management. Except as otherwise set forth in this Agreement,
including, without limitation Section 7.03 below, all decisions concerning the operation and
management of the Company's business shall be made by the Managing Member. A declaration
by the Managing Member, staling that it has approved any specific action concerning the
management of the Company's business as set fo1th in this Section 5.02, shall be conclusive to
any tbi1·d party that a Majority ofMembers have approved such stated specific action and that the
Managing Member is authorized to perform such action on behalf of the Company. The
Managing Member may take any action set fm1h above by a written consent executed with or
without a meeting. The Managing Member shall be authorized to obtain financing for the
Business and sign and deliver any credit documents on behalf of the Company; provided
however no Member shall cause the Company to inctu· a debt in excess of $20,000 without the
unanimous consent of the Members.
Section 5.03 Meetings. The Members are not required to hold meetings, and decisions may be
reached through one or more inforn1al consultations followed by agreement among a 1vfajority of
Members, provided that aU such Members are consulted (although all Members need not be
present during a particular consultation), or by a written consent signed by a Majority of
Members. In the event that Members wish to hold a formal meeting (a "Meeting'') for any
reason, the following procedures shall apply:
(a) Any two Members may call a Meeting of the
Members by giving Notice ofthe time and place ofthe Meeting at least
48 holU's prior to the time of the holding of the Meeting. The Notice
shall reasonably specify the putpose, location and time of the Meeting.
(b) A Majority of Members shall constitute a quorum
for the transaction of business at any Meeting of the Members.
(c) The transactions of the Members at any Meeting,
however caUed or noticed, or wherever held, shall be as valid as
though transacted at a Meeting duly held after call and notice if a
quorum is present and if, either befote or after the Meeting, each
Member not present signs a written waiver of Notice, a consent to the
holding of the Meeting, or an approval ofthe minutes of the Meeting.
(d) Any action required or pe1mitted to be taken by the
Members under tbis Agteement may be taken without a Meeting if a
Majority of the Members individually or collectively consent in
writing to such action.
(e) Members may participate in the Meeting through
Hte use of a conference telephone or similar commun\cations
equipment, provided that all Members participating in the Meeting can
hear one another.
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(t) 1l1e Members shall keep or cause to be kept with
tbe books and records of the Company full and accurate minutes of all
Meetings, Notices, and waivers of :Notices of Meetings, and all written
consents in lieu of Meetings.
Section 5.04 Assets. AU assets of the Company, whether real or personal, may be acquired and
he!d for the Company's purposes set forth in this Agreement in the Company name.
Section 5.05 Payment of Taxes, Debts and Obligations. At all times prior to the termination
or dissolution of the Company, the cash proceeds of the Company, together with any net
reduction in the reserves of the Company, shall be allied first to 1he payme1tt of all taxes, debts
and other obligations and liabilities (including the interest on and the principal of any loan owing
to any Member thereof) of the Company which are then due and owing, and the establishment of
Ieasonable reserves for contingent and future liabilities and distributions of the Company, as
detennined by the Managing Member.
Section 5.06 Delegation. The Managing Member may from time to time cat~se the Company
to employ Persons, including any Affiliate of the Managing Member, to operate the business of
the Company, including performing any function that the Managing Membe(" would otherwise
perform, and to pay such Person any fee that the Managing Member deterJnines to be reasonable;
provided, however, that no fee shall be paid to an Aft11iate of a Member, except as othenvise
provided in this Agreement.
Section 5.07 No Compensation. No Member shall be entitled to any fees, commissions or
other compensation from the Company for any services rendered to or performed for the
Company, except as specifically provided .in this Agreement, otller ancillary agreements
(including Employment Agreements with Members) or as approved by a Supenn!!iority of
Members in accordance with this Agreement.
Section 5.08 Member's Indemnification. Each Member (the 11Indemnifying Patty';) shall
indemnify the Company and each other Member (the "Indemnified Party") for, and shall hold the
Indemnified ParCy, and for, from and against, any and all liability to any Person incurred by the
Indemnified Party by reason of any fratldulent, criminal, or grossly negligent act or omission of
or breach of this Agreement by such Indemnifying Party or any of the shareholders, officers,
agents, emp!oyees or Affiliates of such Jndelhnifyiug Pruty, and for, from and against all cost,
expense and loss incutred by the Indenmified Party in connection therewith.
Section 5.09 Company"'s Indemnification. The Company shall indemnify the Members for,
and shall hold the Members harmless from and against, any liability of the Members to any
Person arising or incurred in, COlltlection with the good faith discharge of the l\tfembers•
obligations w1der this Agreement, except for Jiability imposed on the Members as a result of any
fraudulent, criminal, 01· grossly negligent act or omission of or breach of this Agreement by the
Members or any of the shareholders, officers, agents or employees of the Members.
Section 5.10 Bank Accounts. All funds of the Company shall be deposited in one or more
accouuts with one or more recognized financial institutions in tbe name of the Company, at such
locations as shall be determined by the Managing Member. Withdrawal from such accounts
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516
shall require the signature of such person or persons as a Majority of Members may designate.
(a) Any one Membet where there are more d1an one,
designated by a Majority of the Members, may fi·om time to time open
bank accounts in the name of the Company.
(b) Only persons approved by the Majority of the
Members shall have the authority to deposit and withdraw funds from
any Company bank account, or sign checks or other instruments on
behalf of the Company.
(c) All funds of the Company shall be maintained in a
bank accolmt or accounts and no nmds of the Company shall be
commingled with funds or accounts of any Member, or person related
to any Member.
(d) No Member shall have the right to borrow money
on behalf of any other party or the Company, or to use the credit of any
other party or the Company, for any putpose, except as specificalLy set
f01th in this Agree,ment and for the advancement of the Business.
ARTICLE VI. ACCOUNTING RECORDS, AND TAX MATTERS
Section 6.01 Fiscal Year. The fiscal year of the Company shall be the calendar year.
Section 6.02 Accounting Metho(l. The books and records of the Company shall be
maintained on the method of accounting chosen by the Members and otherwise in accordance
with generally accepted accounting principles consistently applied and shall show all items of
income and expense.
Section 6.03 Company's Books. Complete books of account of the Company's business, in
which each Company transac6on shall be fully and accurately entered, shall be kept at the
Company's principal executive office and shall be open to inspection and copying by each
Member or the Member's authorized representatives on reasonable Notice dm·ing nonnal
business hours. The costs of such inspection and copying shall be borne by the Member
requesting same.
Sectioo6.04 Financial Statements. Financjal books and records of tile Company shall be kept
on the cash method of accounting, which shall be the method of accounting followed by the
Company for federal income tax purposes. A balance sheet, income statement, and tax returns of
the Company shall be prepared promptly fo!Jowing the close of each fiscat year in a manner
appropriate to and adequate for the Company's business and for canying out the provisions of
this Agreement and copies t11ereof shaU be distributed to the Members.
Section 6.05 Company's Records. At all times dtu·ing the term of existence of the Company,
and beyond that term if a Majority of Members deem it necessary, the Company sbaU keep or
cause to be kept the books ofaccow1t referred to in Section 6.03, and the following:
13
517
(a) A cuiTent list of the full name and 1ast known
business or residence address of each Member, together with the
Capital Contribution and the share in Profits and Losses of each
Member;
(b) A copy of the Certificate ofFormation, as amended;
(c) Copies of the Company's federal, state, and local
income tax or information returns and reports, if any, for the six most
recent taxable yearsi
(d) Executed counte~parts of this Agreement, as
amended;
(e) Any powers of attorney under which the Certificate
of Formation or any amendments thereto were executed;
(t) Financial statements of the Company for the six
most Jecent fiscal yearsi and
(g) The Books and Records of the Company as they
relate to the Company's internal affairs for the cutTent and past fom
fiscal yeats.
(h) If a Majority of Members deem that any of the
foregoing items shall be kept beyond the te1·m of existence of the
Company, the repository of said items shaU be as designated by a
Majority ofMembers.
Section 6.06 Partnership Tax Election. Each of the Members hereby recognizes that the
Company will be recognized as a partnership for Federal and New Jersey tax purposes and will
be subject to all provisions of Subchaptet' K of Chapter 1 of Subtitle A of tbe Code.
Section 6.07 Tax Returns. Within 60 days after the end of each taxable year, the Company
shall send to each Member all infonnation necessary fot the Members to complete their federal
and state income tax or information returns, and a copy of the Company's federal, state, and local
income tax or information rehlt'ns for such year. Subject to Section 4.01, the Company shall
make minimum distributions to cover each Members tax liability arising out of income generated
by the Company.
Section 6.08 Tax Matters. The Managing Member shall be the "tax matters pm1ner" for
purposes of the Code and shall notify the Members of any audit or other matters of which the
Managing Member is notified or becomes aware.
ARTICLE VII. MEMBERS' RIGHTS AND VOTING
Section 7.01 No Authority. Except as provided under Section 5.02above, or as provided
otherwise with respect to the Member's duties or as specifically provided in writing by the all of
14
518
the Members, the Members shall not act in the name of or as the representative of the Company
and shall not deal with the Company's assets in any way. and shall not incur any obligation for
which the Company or the other Member will or may be Hable, and the Members shall not
otherwise bind the Compa11y or the other Member, and any violation of this sentence shall be
deemed to constitute willful misconduct.
Section 7.02 Voting Proportion. Each Member shall Vote in proportion to the Member's
Percentage Interest as of the governing record date.
Section 7.03 Prohibited Acts. Notwithstanding anything to the contrary in this Agreement,
the following actions shall require the 1.manimous Vote of the Members:
(a) issumg additional ownership interests in the
Company to new or existing Members or otherwise taking any actions
which would dilute the Percentage Interests ofthe existing Members;
(b) the admissjon of the Assignee as a Substituted
Member;
(c) any amendment of the Cettificate of Formation o1·
this Agreement; or
(d) entering into any contract with the Managing
Member or Annapurna Maddali, or any affiliates, employees or family
members of either (collectively, a "Related Party"), or otherwise
paying or agreeing to pay any remuneration to any Related Patty other
than distributions to the Managing Member in its capacity as Member
in accordance with the terms of this Agreement. .
Section 7.04 Record Date. The record date for determining the Members entitled to Notice of
any Meeting, to vote, to receive any distribution, or to exercise any right in 1-espect of any other
lawful action, shall be the date set by a M~ority of Members, provided that such rec01·d date
s11atl not be more than 60, nor less than 10 days prior to the date of the Meeting, nor more than
60 days prior to any other action. In the absence of any action setting a record date the record
date shall be determined in accordance with the applicable laws ofTexas.
Section 7.05 Proxy. At all Meetings of Members, a Member may Vote in person or by Proxy,
Such pl'Oxy shall be filed with any Member before or at the time of the Meeting, and may be
filed by facsimile transmission to the principal executive oftice of the Company or such other
address as may be given by a Majority of Members to the Members for such pm-poses.
Section 7.06 Jntellectual Property. All copyrights, patent'S, web sites, trade names, trade
secrets, or other intellectual pmperty rights associated with any ideas, concepts, techniques.
inventions, pl'Ocesses, or works of authorship developed or created by the Member ot the
Members during the course of performing Company's wotk shall belong exclusively to
Company and its Members and/or the third pa1ty end client and shall be considered a work made
for hire. Each Member herewith assigns, without any requirement of ft1rU1er consideration, any
right, title, or interest that each such Membe1' may have in such work pmdttct including any
15
519
copyrights, patents, trade secrets or other itltellectual prope11y rights pet1aining thereto. Each
Member wiH provide full information regarding the rights being assigned and will take such
further actions, including but not limited to, execution and delivery of instruments of
conveyance, as may be appropriate to give full and proper effect to such assignment.
ARTICLE Vll. TRANSFERS OF MEMBERSHIP INTERESTS
Section 8.01 Transfer Restrictions. Each Member acknowledges and agrees that the
restrictions on the transfer of membership interest contained in this Agreement is a material
factor in each Member investing in the Company and is necessary to maintain hannony,
continuity, and success.
Section 8.02 Withdrawal. A Member- may withdraw from the Company at any tune by giving
Notice of such Membet·'s intent to withdraw to all other Members, at least 180 calendar days
before the effective date of withdmwal. Withdrawal shall not release a Member from any
obligations and liabilities under thls Agreement which were accrued or incuned before the
effective date of withdl·awal. A withdrawing Member shall divest the Member's entire
Membership Interest before the effective date of withdrawal in accordance with the transfer
restrictions and option dgllts set fotih below.
Section 8.03 Right of First Refusal. Except as otherwise provided herein, no Member shall
sell, transfer, pledge, encumber or otherwise dispose of her or his Membership Inte1·est to any
person, fum, Company or other entity, without the consent of the Company as detennined by a
Supermajority of the Members, unless the Member desiring to make the transfer or
encumbrance, hereinafter referred to as the "Selling Member," shall have first made the offer to
sell hereinafter described ("Offer"), and such Offer shall not have been accepted, and such
transfer or encumbrance is ultimately made on the same tem1s set f011h in the Offer.
(a) The Offer which shall be given to the Company and
the other Member shall consist of an offer to sell all of the
Membership Interest of the Company O\\'ned by the Selling Member,
to which shall be attached a statement of intention to transfer or
encumber, as the case may be, the name and address of the prospective
purchaser or lien or, the percentage of Membership Interests involved
in any such proposed transfer or enculnbrance, and the price and tem1s
of any such b·ansfer or encumbrance («Bonafide Offer"), in accordance
with the provisions ofSection 8.03(b) hereof.
(b) If any such Selling Member has received a bonafide
written offer to purchase all ofher or his Membetsbip Interest which
she or he wishes to accept or a bona fide written offer to receive a loan
or an advance of money which loan or advance involves an
encumbrance upon said Membership Interest to secUI'e the loan or
advance as refened to in Section 8.03{a) above, the Selling Member
shall submit to the Company within fourteen (14) days after receipt of
such Bonafide Offer, a written notice including a copy of such
Bonafide Offer~ as re be construed as though more
narrowly drawn, if a nan·ower construction would avoid such invalidity, illegality, or
unenforceability or, if that is not possible, such provision shall, to the extent of such invalidity,
illegality or unenforceability, be severed, and the remaining provisions of this Agreement shaH
remain in effect. The intent of the parties hereto is that the Company is recognized as a limited
liability company under the Code, and all provisions herein are to be intel'preted under Texas law
to conform to such intent.
Section 10.04 Arbitration. Except as otherwise provided in this Agreement, any dispute,
controversy or claim arising out of or relating to this Agreement, or any breach thereof, including
without limitation any cl~im that this Agreement, or any part hereof, is invalid, illegal or
othenvise voidable or void, shall he submitted to binding arbitration by an American Arbitration
Association ("AAA") arbitrator, or such other arbitrator as may be agreed upon by the parties.
Hearings on such al'bitration shall be conducted in Bexar County in the State of Texas or jf no
arbitrator is available in such county, any cotmty in the State of Texas. A single arbitrator shall
23
527
arbitrate any such controversy. The arbitrator shall hear and determine the controversy in
accordance with applicable law and the intention of the parties as expressed in this Agreement,
upon the evidence produced at an arbitration hearing scheduled at the request of eithex party.
Judgment on the award of the arbitratortuay be entered in any coutt having jurisdiction thereof.
(a) Power And Authority Of Arbitrator. The arbitrator
shall not have any power to alter, amend, modify or change any of the
terms of this Agreement nor to grant any remedy which is either
prohibited by the tettns of this Agreement, or not available in a court
of law.
(b) Goveming Law. AU questions in respect of
procedure to be followed in conducting the arbitration as well as the
enforceability of this Agreement to arbitrate which may be resolved by
state law shall be resolved according to the laws of the State of Texas.
Section 10.05 Binding Effect. This Agreement shall be binding on and inure to the beneftt of
the Members and tbeir heirs, personal representatives, and pem1itted successors and assigns.
Section 10.06 Protlouns; Statutory References. All pronouns and all variations thereof shall
be deemed to refer to the masculine, feminine, or neuter, singular or pltu'al, as the context in
which they are used may require. Any reference to the Act or other statutes or laws will include
aU amendments, modifications, or replacements of (he specific sections and provisions
concemed.
Section 10.07 Notices. Any notice, demand, consent, election, offer, approval, request~ or other
communication (collectively, "Notice") given under this Agreement shall be in -writing and shall
be sen,ed personalJy or delivered by first class, registered or certified, retum receipt requested
U.S. mail, postage prepaid. Notices may also be given by tJ:ansmittal over electronic transmitting
devices st1ch as Telex, facsimile or telecopy machine, if the party to whom the notice is being
sent has such a device in its office, provided a complete copy of any notice so transmitted shall
also be mailed in the same manner as required for a mailed notice. Notices shall be deemed
received at the earlier of actual receipt or three (3) days following deposit in U.S. mail, postage
prepaid. Notices shall be directed to the Company at the Company's principal place of business
as specified in Section 2.04 of this Agreement, and to the Members at the addresses shown in the
first page of tbis Agreement pmvided a Member may change such Member's address fol' notice
by giving written notice to all other Members in accordance with this Section 14.15.
Section 10.08 Additional Documents and Acts. The parties to this Agreement shall promptly
execute and deliver any and all additional documents~ instnunents, notices, and other assurances,
and shall do any and all other acts and things, reasonably necessary in cotmection with Lhe
perfonnance of their respective obligations 1.mder this Agreement and to carry out tl1e intent of
the Members.
Section 10.09 No Authority. Except as provided in this Agreement, no provision of this
Agreement shall be construed to constitute a Member, in the Member's capacity as such. the
agent of any other Member.
24
528
Section 10.10 Severability. If any provision of this Agreement or the application of such
provision to any person or circwnstance shall be he1d invalid, the remainder of this Agreement or
the application of such provision to persons or circumstances other than those to which it is held
invalid shall not be affected thereby.
Section 10.11 Requisite Authority. Each Member represents and warrants to the othe1•
Members that the Member has the capacity and authority to enter into this Agreement.
Section 10.12 Headings. The alticle1 section, and paragraph titles and headings contained in
this Agreement are inserted as matter of convenience and for ease of reference only and shall be
disregarded for all other purposes, including the construction or enfmcement of this Agreement
or any of its provisions.
Section 10.13 No Third P~rty Beneficiaries. This Agreement is made solely for the benefit of
the parties to this Agreement and their respective pe1mitted successors and assigns, and no other
person or entity shall have or acquire any right by virtue of t1)is Agreement.
[Stgnatures.follow on next page]
25
529
JN WITNESS, WHEREOFr fhe parfi.es haveexectlted or .caused to be exe.culed this
Operating Agreement of CRAWfC)lr~P, .H'UNTL.EIGRMEPlCAL SUPPLIESYLLC on the ·day
f)i1Qy.e,a:t fL,tSt ~QQVe. Writt¢n.
COMPANY.:
CRAWFORDimN'fLEIGHME·DlCAL
SUPPLIES, Lt-C
#.,, ~· I
By: PRE5s.it~PMIND~r
P.,uthQt·iz-ed Represei1tafive ·
MEMi.lER(S)X
ANNAPURNAMADDALl
530
EXHIBIT A
Membership Interest Table
Name Capital Contribution Percentage
PREM SWAROOP KALIDINDI $187.50 l8.75%
ANNAPURNA MADDALI $562.50 56.25%
OBDULIA, LLC $250.00 25%
27
531
Tab 3
FILED
3/31/2015 4:07:26 PM
Donna Kay McKinney
Bexar County District Clerk
Accepted By: Anthony Barrow
CAUSE NO. 2013-CI-00404
HUNTLEIGH HOME MEDICAL, LTD. § IN THE DISTRICT COURT
AND JANE ELIZABETH FLORES, AND §
MICHAEL FLORES, §
§
Plaintiffs, §
§
v. § 57TH JUDICIAL DISTRICT
§
CRAWFORD MEDICAL SUPPLIES, LLC, §
SRINIVAS "SAM" MADDALI, §
PREM SWAROOP KALIDINDI, AND §
MADDALIREALTY,LLC, §
§
Defendants. § BEXAR COUNTY, TEXAS
PLAINTIFFS' THIRD AMENDED PETITION
TO THE HONORABLE COURT:
Plaintiffs Huntleigh Home Medical, Ltd., Jane Elizabeth Flores and Michael Flores file
this third amended petition and would respectfully show:
DISCOVERY LEVEL
The patties are conducting discovery under a Level 3 discovery control plan.
PARTIES
Plaintiff Huntleigh Home Medical, Ltd. ("Huntleigh") is a Texas limited partnership.
Plaintiff Jane Elizabeth Flores is an individual resident of Bexar County, Texas.
Plaintiff/Counter-plaintiff Michael Flores is an individual resident of Bexar County,
Texas.
Defendant Crawford Medical Supplies, LLC ("CMS") 1s a Texas limited liability
company and has already entered an appearance in this case.
Defendant Sam Maddali is an individual who, upon information and belief, is a resident
of New Jersey. He has already entered an appearance in this case.
425
Defendant Prem Swaroop Kalidindi is an individual who, upon information and belief,
is a resident of Texas. He has already entered an appearance in this case.
Defendant Maddali Realty, LLC ("Maddali Realty") is a Texas limited liability
company and has already entered an appearance in this case.
JURISDICTION
This Court has jurisdiction over Defendants CMS and Maddali Realty because they are
both Texas limited liability companies. The Comt has jurisdiction over Defendant Kalidindi
because, upon information and belief, he is a Texas resident, and because he is the managing
member of CMS.
This Court has personal jurisdiction over Defendants Maddali and Kalidindi because
Plaintiffs' causes of action arise from and relate to their contacts with Texas, and because they
purposefully availed themselves of the privilege of conducting activities in Texas.
Maddali traveled to Texas on many occasions to meet with Plaintiffs Jane Elizabeth
"Belle" Flores and her son, Michael Flores. All of these meetings concerned Huntleigh and the
assets at issue in this case. Maddali committed wrongful actions complained of in this petition in
Texas.
Even if Kalidindi were a resident of another state, the same analysis applies to him. He
also traveled to San Antonio on many occasions to meet with Plaintiffs. All of these meetings
concerned Huntleigh and Huntleigh assets. Kalidindi committed wrongful actions complained of
in this petition in Texas.
Maddali and Kalidindi have committed torts, in whole or in part, in Texas. This includes
making misrepresentations in Texas that give rise, in whole or in part, to Plaintiffs' claims. They
made these misrepresentations to Michael Flores, who they knew was a Texas resident, and to
2
426
Huntleigh, who they knew was a company based wholly in Texas, with the intent to wrongfully
deprive Plaintiffs of assets located in Texas. Maddali also ordered an employee he knew was in
Texas to purposefully interfere with a contract between two Texas companies. Kalidindi signed
an employment contract with Michael on behalf of CMS in Texas, and did so at a time at which
he had no intention (and therefore CMS had no intention) of complying with the agreement.
Maddali and Kalidindi undertook contacts with Texas by purposefully availing themselves of the
privilege of conducting activities here, and their liability arises from or relates to those contacts.
Maddali and Kalidindi have also subjected themselves to the general jurisdiction of Texas
courts because Maddali owns or controls several Texas companies, including Maddali Realty,
and regularly conducts business in this state. Kalidindi lives in Texas or spends substantial time
here.
Maddali and Kalidindi have purposefully availed themselves of the privilege of
conducting activities within Texas, and the Court's assertion of jurisdiction over them meets
traditional notions of fair play and substantial justice.
The damages at stake are within the jurisdictional limits of the Court.
VENUE
Venue is proper in Bexar County, Texas because that is the county in which:
a. all or a substantial part of the events or omissions giving rise to the claims
occurred;
b. CMS has its principal place of business;
c. Huntleigh has its principal place of business; and
d. Plaintiffs Belle Flores and Michael Flores have their residences.
3
427
BACKGROUND FACTS
Defendants convinced Plaintiffs they wanted to work together to build a new home health
care company. Once Defendants were able to gain Plaintiffs' confidence however, they took
everything they could from Huntleigh and pushed Michael and Belle aside.
Before Defendants came into the picture, Huntleigh had provided high quality home
health care services to patients in the San Antonio area since 1981. Michael Flores and his
mother, Jane Elizabeth "Belle" Flores, are the principals ofHuntleigh.
Maddali wanted to get involved in the health care industry in San Antonio and reached
out to Michael and Belle to buy Huntleigh. They expressed interest, and provided Maddali
information about Huntleigh - including the fact that the IRS asserted a tax lien against
Huntleigh. In connection with the negotiations, Plaintiffs provided Maddali, and later Kalidindi,
with valuable trade secrets, including Huntleigh's customer list and customer infonnation, billing
software, customer contracts, pricing data, supplier and vendor lists (the "Trade Secrets").
Maddali then said he was no longer interested in buying Hunt1eigh 's operations, but
instead proposed to start a new home health care company with Huntleigh, Michael and Belle.
The parties - Maddali, Michael , Belle, and Huntleigh- agreed that they would begin the process
of starting the new home health care company and all that required, such as gaining accreditation
and negotiating contracts with third party payors, while Huntleigh wound down its operations.
Maddali proposed that he and his people be allowed to use Huntleigh's offices to do so, and that
Huntleigh provide employees and other support during the transition period. In tum, Maddali
agreed to provide support for Hunt1eigh to allow it to wind down its operations, including
providing business expertise and, if necessary, financing. Plaintiffs agreed. Maddali told
Plaintiffs they could trust him, saying he "always made a success from [his] business dealings."
4
428
The patties agreed that Michael would be an employee of the new entity, and would help
start the new entity's operations, while continuing to manage Huntleigh 's operations. Before the
new entity was ready to begin operations, Huntleigh would continue to take care of its existing
patients, meet its obligations under existing contracts, bill for its services and collect payments.
The parties agreed that, when the new entity was ready to begin operations, after it had
gained accreditation and secured contracts from payers, Plaintiffs would assist the new entity in
possibly taking over Huntleigh's existing patients. The patients would have to agree, but if they
did, the new entity would be able to seamlessly transition care to itself from Huntleigh, thereby
ensuring continuous care for the patients. Huntleigh had equipment out on rent to these patients,
and the parties agreed that, for those patients who agreed to transfer their care from Huntleigh to
the new entity, Maddali would simply buy from Huntleigh its equipment that was out on rent to
these patients. The parties agreed that Maddali would pay a reasonable, fair market value for the
equipment and other Huntleigh assets at the time it needed it.
As an employee, Michael would help the new entity ramp up its back office operations,
including using setting up billing software and other requirements for the new entity to bill for its
services and collect payments. In the meantime, Huntleigh was to continue providing care and
collecting for its work.
In December 2011, the new entity, Crawford Huntleigh Medical Supplies, LLC 1
("CMS"), came into existence. Michael became an employee of CMS as the parties had agreed.
Maddali brought several people in to Huntleigh's facility, including Kalidindi and Nanda
Katepalli, to work on CMS' preparations, and Michael began helping them as the parties agreed.
Maddali later dropped "Huntleigh" from the name of the entity, changing it to Crawford Medical Supplies,
LLC.
5
429
For instance, Michael was successful in getting accreditation for CMS from the
Accreditation Commission for Health Care, Inc. , a vital step for doing business in the home
health care field. Maddali also provided Michael a template contract for Huntleigh to "share"
staff with CMS.
Also in March 2012, Michael began working on Huntleigh's Medicare Part B
Competitive Bidding application. CMS could not patiicipate in the Competitive Bidding process
because it did not have a Medicare Provider number, and it could only begin to pursue a
Medicare Provider number after it was accredited. On March 9, 2012, due in large part to
Michael's expertise and efforts, CMS passed its accreditation. But Defendants still needed
Plaintiffs' help, because it would still take months for CMS's Medicare Provider Number
application to be processed. CMS could not bill Medicare until it acquired this number.
While they were happy to accept the benefits of Michael 's efforts on behalf of CMS,
Maddali and Kalidindi began to interfere with Michael's ability to wind down the operations of
Huntleigh as the parties had agreed. Instead, they set about to force Huntleigh to pay the bills,
keep the revenues for themselves, and simply take Huntleigh's assets.
Defendants ruin the Hospice Source deal
In December 2011, Huntleigh Home Medical received notice that it was losing a contract
with Odyssey Hospice. The new company taking over the contract, Hospice Source, offered to
buy the Huntleigh equipment that was out on rent to over 300 patients. Hospice Source
conducted due diligence on the equipment by riding with Huntleigh delivery personnel to review
the brand and quality of the Huntleigh equipment.
On January 13, 2012, Huntleigh and Hospice Source agreed that Hospice Source would
buy the equipment being used by those patients. Hospice Source agreed to pay $110,000 for the
6
430
equipment.
Soon thereafter, Maddali teamed of the Huntleigh equipment sale to Hospice Source and
had to figure out a way to kill it, because he planned on simply taking the Huntleigh equipment
for CMS. On Maddali's orders, a CMS employee cancelled the Hospice Source contract. This
cost Huntleigh $110,000, but more importantly to Defendants, allowed them to keep the
equipment.
Defendants take Huntleigh equipment and assets
After stopping the Hospice Source deal , Maddali ordered CMS employees to take the
Huntleigh labels and other identifying information off of the equipment and put on CMS labels.
Maddali said this would fool the banks and the IRS, and would allow CMS to simply take them
free and clear.
In April 2012, Maddali again came to San Antonio with the intent to solidify his hold on
the Huntleigh assets. He told Huntleigh employees that revenues coming in for Huntleigh
patients using Huntleigh equipment now belonged to CMS. He prevented employees from
paying Huntleigh expenses.
Defendants take over the Frost Bank account
Huntleigh had for years held its operating account at Frost Bank. In April 2012, Maddali
asked Michael for access to the Frost Bank account. Michael agreed because Maddali told him
he would have his manager Nanda Katepalli handle office matters, and that Michael was more
valuable as a salesman generating business.
lt did not take Maddali long to take advantage of his control over the Frost account. In
August 2012, the account became perilously low for payroll. Kalidindi demanded Michael
deposit Huntleigh funds to cover payroll, even though CMS was now using former Huntleigh
7
431
employees to carry out its business.
Huntleigh negotiated with the IRS to settle the tax lien for a relatively small amount. The
IRS settlement was only available as long as Huntleigh paid all current taxes as they came due.
Now that they had control over the Frost Bank account however, Defendants simply took
the money that would and should have gone to pay the IRS agreement and current taxes.
Michael asked Defendants to leave at least enough funds in the account to cover the taxes, but
they refused.
Defendants interfered with Huntleigh's ability to satisfy not only the IRS settlement, but
also its ability to make current tax payments, by taking Huntleigh's money and receivables.
Defendants push Michael and Belle out
By September 2012, Maddali had gained enough levers of control over Huntleigh to start
moving Michael and Belle out. He told Michael he was not to be involved in any negotiations
for CMS. He also directed Michael to stay out of any negotiations on behalf ofHuntleigh.
On September 17, 2012, Michael expressed concern to Kalidindi that he was taking
revenues owed to Huntleigh and using them to pay CMS bills.
Kalidindi assured Michael that CMS would take over payroll starting on September 17,
2012. Michael agreed to have Huntleigh issue payroll checks covering payroll up until that date,
and that was supposed to be Huntleigh's last payroll processing.
On October 3, 2012, Nanda demanded Michael have Huntleigh process payroll under
Huntleigh. CMS had already agreed it would cover payroll starting September 17, so Michael
refused Nanda's demand. Kalidindi became incensed. He told Michael that CMS would not
process payroll, and that Michael needed to tell "his" staff that they are not getting paid. CMS
also refused to pay Michael his salary.
8
432
A few weeks after forwarding Huntleigh's mail to his house, Michael noticed he was
receiving an unusually low volume of mail for Huntleigh. After checking with the post office,
he discovered CMS had falsely told the postal carrier the change of address fonn was invalid,
and demanded that Huntleigh mail be delivered to CMS. While Michael was eventually able to
get the Huntleigh mail forwarded to him, Defendants had received Huntleigh mail, including
checks for Huntleigh.
On October 5, 2012, Defendants had completed their plan to gut Huntleigh, and ban·ed
Michael and Belle from the premises.
Since Defendants' takeover, they have acted in concert to launder funds belonging to
Plaintiffs. Maddali Realty is a limited liability company owned and controlled by Sam Maddali
and his wife. Defendants transferred to Maddali Realty at least $37,000 in 2013, with over
$23,000 transferred in December 20 13 alone.
CAUSES OF ACTION
BREACH OF CONTRACT/QUANTUM MERUIT- The Maddali Agreement - all Plaintiffs
against Maddali
Huntleigh, Michael and Belle agreed with Maddali to start a new home health care
company, which eventually became CMS. Michael would help with the start-up, such as helping
gain accreditation and negotiating contracts with third party payors. Plaintiffs would allow
Maddali to use Huntleigh's offices while CMS was starting the paperwork necessary to become a
home health care company, and Maddali would allow Huntleigh to continue its business while it
wound down its operations. Maddali agreed to provide Huntleigh support, both business
expertise and financing, in exchange for use of the Huntleigh facility and for assistance in
transferring operations to CMS.
9
433
Michael would be an employee of the new entity, and would help start the new entity's
operations, while continuing to manage Huntleigh's operations. Before the new entity was ready
to begin operations, Huntleigh would continue to take care of its existing patients, meet its
obligations under existing contracts, bill for its services and collect payments.
The parties agreed that, when the new entity was ready to begin operations, after it had
gained accreditation and secured contracts from payors, Plaintiffs would assist the new entity in
possibly taking over Huntleigh's existing customers. The customers would have to agree, but if
they did, the new entity would be able to seamlessly transition care to itself from Huntleigh,
thereby ensuring continuous care for the patients. CMS would pay a reasonable price for the
Huntleigh equipment, inventory, and other assets.
As an employee, Michael would help the new entity ramp up its back office operations,
including using setting up billing software and other requirements for the new entity to bill for its
services and collect payments. Belle would also provide her business expertise in helping start
the new entity. In the meantime, Huntleigh was to continue providing care and collecting for its
work.
Maddali breached this contract (the "Maddali Agreement") by refusing to allow Plaintiffs
to wind down the operations. Instead, he took or ordered the other Defendants to simply take
Huntleigh's assets. He also refused to pay for the Huntleigh equipment and its other assets.
Maddali' s breach caused damages to Plaintiffs.
In the alternative, Maddali is liable to Plaintiffs under quantum meruit.
BREACH OF CONTRACT/QUANTUM MERUIT - The Employment Agreement - Michael
against CMS
CMS entered into an employment contract with Michael, under which it agreed to pay
10
434
him an annual salary. Michael perfotmed his part of the bargain, but never received any
payment for his services. CMS breached the contract by failing to pay, and owes Michael under
the contract.
In the alternative, CMS is liable to Michael under quantum meruit.
PROMISSORY ESTOPPEL - all Plaintiffs against Maddali
Maddali is also liable for promissory estoppel. He promised to provide support for
Huntleigh, both financial and business consulting expertise, in continuing and winding down its
operations. He promised to allow Michael and Belle to continue winding down Huntleigh
operations if they allowed him to use Huntleigh office space and if they helped statt the new
health care entity. He also promised to pay Huntleigh a reasonable cost for its equipment and
other property that it would use. All Plaintiffs relied on these promises to their detriment.
Plaintiffs allowed Maddali to use Huntleigh's offices, and provided material support in starting
the new health care entity. Plaintiffs also provided Maddali access to Huntleigh's Trade Secrets.
Maddali should have known that Plaintiffs would rely on these statements, and injustice
can be avoided only by enforcing Maddali 's promises.
CONVERSION - Huntleigh against all Defendants
Defendants are liable for conversion. Huntleigh owned, possessed and had a right to
immediate possession of its property (the "Property"), including:
a. equipment;
b. inventory;
c. bank accounts and accounts receivable; and
d. Trade Secrets.
Defendants have wrongfully exercised dominion or control over the Property, and
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Huntleigh has suffered damages due to Defendants' wrongful actions.
TORTIOUS INTERFERENCE WITH CONTRACT - The Maddali Agreement - Plaintiffs
against CMS and Kalidindi
These Defendants' interference with Plaintiffs' agreement with Maddali constitutes
tortious interference. Their interference was will:ful and intentional, and their actions
proximately caused damages to Plaintiffs.
TORTIOUS INTERFERENCE WITH CONTRACT - The Hospice Source Agreement -
Huntleigh against all Defendants
Defendants' interference with Huntleigb's contract with Hospice Source constitutes
tortious interference with contract. Defendants' interference was willful and intentional, and its
actions proximately caused Huntleigb to lose that contract. Huntleigh suffered damages as a
result.
MISAPPROPRIATION OF TRADE SECRETS - Huntleigh against Maddali. Kalidindi, and
CMS
These Defendants' actions and representations shown in this petition also constitute
common-law misappropriation of Huntleigh 's Trade Secrets.
These Trade Secrets, including its customer list and customer information, customer
contracts, billing software, pricing data, supplier and vendor lists. Defendants used or disclosed
this proprietary information without authorization after acquiring it by improper means or
through breach of a confidential relationship. Huntleigh provided Defendants with access to its
trade secrets because Maddali said he wanted to buy Huntleigh or its assets, or because
Defendants represented they wanted to use Huntleigh's facility only to start CMS. Instead,
Defendants wrongfully used the trade secrets to take over Huntleigh's existing operations and to
profit themselves. Huntleigh suffered damages as a result.
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Huntleigh used and had the right to use this proprietary infonnation in its business of
home health care.
FRAUD/FRAUD BY NONDISCLOSURE/FRAUDULENT INDUCEMENT - all Plaintiffs
against Maddali, Kalidindi and CMS
These Defendants are liable for common-law fraud. Defendants made representations
that were materially false. These statements included Maddali telling Plaintiffs and Michael he
wanted to work with them to start a new home health care company, and that he would allow
Huntleigh to wind down its operations while the new entity got started. He also told them that,
when the new entity was ready to begin operations, Huntleigh would be paid for the equipment
and other assets it would use in its operations. He also told them they could ttust Maddali.
Kalidindi assured Plaintiffs CMS would start making payroll on September 17, 2012. They also
misrepresented that they would pay reasonable value for Huntleigh equipment and inventory.
They made these statements both before and after CMS was formed, and before and after they
began using the Huntleigh offices. These statements were false.
Maddali and Kalidindi (and therefore CMS) knew these representations were false, and
that they were simply using Michael and Belle to gain access to, and ultimately take, Huntleigh's
Property. In the alternative, they made these representations recklessly, as positive assertions,
and without knowledge of their truth.
Plaintiffs relied on these representations to their detriment and they suffered damages.
In the alternative, Defendants concealed certain facts from Plaintiffs that they had a duty
to disclose, including the fact they had no intention of starting a new home health care company
with Michael and Belle, and simply wanted to use them to gain access to, and to ultimately take,
Huntleigh's Property without paying for it.
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Defendants were deliberately si lent when they had a duty to speak on these issues, and by
failing to disclose these facts, intended to induce Plaintiffs to take some action or refrain from
acting. Plaintiffs relied on these nondisclosures and suffered injuries as a result.
NEGLIGENT MISREPRESENTATION- all Plaintiffs against Maddali, Kalidindi, and CMS
Defendants' actions and representations shown in this petition also constitute negligent
misrepresentations.
CIVIL CONSPIRACY- all Plaintiffs against all Defendants
Defendants conspired to defraud Plaintiffs, take Huntleigh's Property, and commit the
acts outlined in this petition. They agreed to steal Huntleigh's Property to the detriment of
Plaintiffs.
Additionally, Belle is the assignee of a UCC granted in favor of Jefferson State Bank
against Huntleigh and its assets, and is therefore a secured creditor of Huntleigh. Defendants'
actions constitute civil conspiracy to defraud Belle as a secured creditor, by taking Huntleigh
assets. This is a conspiracy to commit fraud, to hinder, delay or defraud creditors, and to commit
fraudulent conveyance, among others.
Defendants were members of a combination of two or more persons, the object of which
was to accomplish an unlawful purpose or a lawful purpose by unlawful means. The members
had a meeting of the minds on the object or course of action, and one of the members committed
an unlawful, overt act to further the object or course of action. These acts include:
a. changing the identification numbers and other identifiers on Huntleigh's
equipment;
b. obtaining Huntleigh's mail by deception or other unlawful means, violating 18
U .S.C. 1701 and 1708;2
2
Plaintiffs make no claims under federal law.
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c. defrauding the IRS by converting or transferring assets that otherwise could be
used to satisfy the IRS lien;
d. unlawfully interfering with Huntleigh's contract with Hospice Source;
e. unlawfully interfering with the Maddali Agreement;
f. unlawfully interfering with Michael's employment agreement;
g. taking or converting Huntleigh's Property;
h. transferring to themselves funds that belonged to Huntleigh or were generated
using Huntleigh assets;
1. other unlawful actions shown in this petition.
In a civil conspiracy, each defendant is liable for his or her own acts and for acts done by
coconspirators in furtherance of the unlawful combination. Defendants are jointly and severally
liable for all damages suffered by Plaintiffs.
FRAUDULENT TRANSFER ACT- Belle against all Defendants
Defendants' actions in taking or conveying Huntleigh's assets are fraudulent transfers
under the Unifonn Fraudulent Transfer Act, Texas Business & Commerce Code Chapter 24.
Belle is entitled to all relief under section 24.008 of that chapter.
Defendants transfened assets of Huntleigh with the actual intent to hinder, delay, or
defraud Belle, who was a creditor of Huntleigh, or without receiving a reasonably equivalent
value in exchange for the transfer or obligation. Defendants intended to have Huntleigh incur, or
believed or reasonably believed that Huntleigh would incur, debts beyond its ability to pay as
they became due.
Defendants took Huntleigh's Propetty, or conveyed it to themselves, including cash,
accounts receivable, equipment, and Trade Secrets. Defendants knew that Huntleigh was
winding down its business and that these actions would cause Huntleigh to incur debts beyond its
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ability to pay as they came due. Huntleigh did not receive a reasonably equivalent value in
exchange for these transfers.
Belle's claim arose in October 2012, and these transfers occmTed after this time. Ful1her,
Huntleigh did not receive reasonably equivalent value in exchange for the transfer and Huntleigh
was either insolvent at the time of these transactions or became insolvent as a result of these
transactions.
For instance, Defendants changed the identification labels on Huntleigh's equipment in
January 2013. Defendants transferred to Maddali Realty at least $37,000 in 2013, with over
-
$23,000 transferred in December 2013 alone. Because they have conspired to commit the actions
outlined in this petition, each Defendant is jointly and severally responsible for all such actions.
ASSISTING AND ENCOURAGING/ASSISTING AND PARTICIPATING/AIDING AND
ABETTING - all Plaintiffs against all Defendants
All Defendants were aware that they would take Huntleigh's Property, and all intended
to, and did, assist. Defendants' actions were a substantial factor in causing the hann to Plaintiffs.
Defendants are jointly and severally liable for all damages suffered by Plaintiffs.
UNJUST ENRICHMENT - all Plaintiffs against all Defendants
Defendants were unjustly enriched when they obtained benefit from Plaintiffs by fraud,
duress, or the taking of an undue advantage. All Defendants wrongly secured or passively
received benefits through the taking of Plaintiffs' assets and business.
MONEY HAD AND RECEIVED - Huntleigh against all Defendants
Defendants hold money that in equity and good conscience belongs to Huntleigh. They
should be required to return it.
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RESPONDEAT SUPERIOR
CMS and Maddali Realty are fully responsible for the actions of its employees,
representatives, and agents, including Kalidindi and Maddali.
DAMAGES
Defendants are general and special damages, including lost profits of Huntleigh and/or
reasonable royalties for the unlawful use of its Trade Secrets. Plaintiffs request consequential
damages and restitution damages. Defendants are jointly and severally liable. Pursuant to Texas
Rule of Civil Procedure 47, Huntleigh and Belle specify that $2 million is the maximum amount
of damages claimed by each, and Michael specifies that $200,000 is the maximum amount of
damages claimed by him.
EXEMPLARY DAMAGES
Defendants are jointly and severally liable for exemplary damages under Plaintiffs'
claims for or under fraud or tortious interference with contract, or because their conduct was
conducted with malice. Defendants are jointly and severally liable for exemplary damages under
Plaintiffs' claims for or under:
a. tortious interference with contract;
b. the Theft Act;
c. consptracy;
d. fraud;
e. negligent misrepresentation; and
f. trade-secret misappropriation.
Any exemplary damages in this case are not subject to the statutory caps. TEX. Crv.
PRAC. & R EM. CODE § 41.008(c)(10),(11),(12),(13). Defendants misapplied the Trade Secrets
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provided by Plaintiffs in the course of negotiations for the potential purchase of Huntleigh, and
these are fiduciary property. Defendants also secured by deception the execution of documents
including Michael's employment agreement and the Aug. 23, 2012 letter signed by Michael.
ATTORNEYS' FEES
Defendants are liable for Plaintiffs' attorneys' fees under Texas Civil Practice &
Remedies Code section 38.001. Defendants are liable for Belle's attorneys' fees under the
Uniform Fraudulent Transfer Act, section 24.013 of the Texas Business & Commerce Code.
Maddali is liable for Plaintiffs' attorneys' fees under promissory estoppel.
CONDITIONS PRECEDENT
All conditions precedent have been performed, have occurred or are excused.
PRAYER
Plaintiffs ask the Court to enter a judgment against Defendants, jointly and severally, for:
a. Actual damages;
b. Exemplary damages;
c. Prejudgment and postjudgment interest;
d. Costs of suit; and
e. Attorney's fees , both at trial and on appeal.
They also ask for all other relief to which they may be entitled.
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Dated: March 3/ <;)· , 2015.
Respectfully submitted,
DAVIS & SANTOS
ATTORNEYS & COUNSELORS, P.C.
By: ?Ja~~
State Bar No. 24002667
mmurphy@dslawpc. com
Guillermo "Jeff' Benavides
State Bar No. 24087160
j benavides@dslawpc. com
112 E. Pecan Street, Suite 900
San Antonio, Texas 78205
Tel: (210) 853-5882
Fax: (21 0) 200-8395
ATTORNEYS FOR PLAINTIFFS
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of this document will be sent to the following
by:
Elliott S. Cappuccio Regular Mail
Leslie Sara Hyman Certified Mail, RRR
P ULMAN, CAPPUCCIO, P ULLEN, BENSON & Hand Delivery
J ONES, LLP Facsimile
2161 N.W. Military Highway, Suite 400 Email
San Antonio, Texas 78213
Attorneys for Defendants
on the 3\~ day of March, 2015.
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