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DAVID D. SCHNEIDER # 211498 E-FILED
N. RICHARD SHREIBA #315509 7/29/2019 5:32 PM
DOWLING AARON INCORPORATED Superior Court of California
8080 N. Palm Avenue, Third Floor County of Fresno
Fresno, CA 93711 By: A. Rodriguez, Deputy
(P.O. Box 28902, Fresno, CA 93729)
559-432-4500 Tel.
559-432-4590 Fax
dschneider@dowlingaaron.com
rshreiba@dowlingaaron.com
Attorneys for Plaintiff OMNI WOMEN’S HEALTH MEDICAL GROUP, INC.
SUPERIOR COURT OF CALIFORNIA, COUNTY OF FRESNO
CENTRAL DIVISION
10
11
OMNI WOMEN’S HEALTH MEDICAL Case No. 19CECG02730
12 GROUP, INC.,
COMPLAINT FOR BREACH OF
13 Plaintiff, FIDUCIARY DUTY; BREACH OF
WRITTEN CONTRACT;
14 Vv. CONSTRUCTIVE TRUST; UNJUST
ENRICHMENT; FRAUD AND DECEIT —
15 HAROLD GROOMS, M.D.; AND DOES 1- SUPPRESSION AND CONCEALMENT OF
25, MATERIAL FACTS
16
Defendants.
17
18 Plaintiff OMNI WOMEN’S HEALTH MEDICAL GROUP, INC. (hereinafter,
19 "Plaintiff" or “OMNT”) alleges:
20 PARTIES
21 1 Plaintiff is, and at all times mentioned herein was, a California
22 corporation, doing business in the County of Fresno, State of California.
23 2. Plaintiff is informed and believes that defendant Harold Grooms, M.D.
24 (hereinafter, “GROOMS’”) is, and at all times mentioned herein was, an individual residing in
25 Fresno County, California.
26 3. Plaintiff is unaware of the true names and capacities of defendants sued
27 herein as DOES 1 — 25 and thus sues said parties by such fictitious names. Upon ascertaining
28 their true names and capacities, Plaintiff will amend this Complaint to set forth the same
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COMPLAINT
together with appropriate charging allegations. Plaintiff is informed, believes and thereon
alleges that each of the fictitiously-named defendants is in some manner responsible for the
events and happenings referred to herein, and thereby proximately and foreseeably caused
damage to Plaintiff as alleged herein.
4. Plaintiff is informed, believes and thereon alleges that each of the
defendants herein was the agent, servant, or employee of each of the remaining defendants, and
that at all times herein mentioned each was acting within the scope of such agency and
employment and for the mutual benefit or for the benefit of one or more of the defendants
named herein.
10 GENERAL ALLEGATIONS
11 5. OMNI is a professional medical corporation organized and existing
12 under the laws of the State of California.
13 6. GROOMS is a medical doctor licensed to practice medicine in the State
14 of California with a specialty in obstetrics and gynecology, and was a shareholder, officer and
15 director of OMNI. At all relevant times through July 29, 2016, GROOMS was an OMNI
16 shareholder and provided professional medical services at OMNI. At all relevant times through
17 July 29, 2016, GROOMS owed fiduciary, contractual and other duties and obligations to
18 OMNI. GROOMS provided professional medical services at OMNI pursuant to an
19 Employment Agreement effective October 17, 2000, a true and correct copy of which is
20 attached hereto as Exhibit “1”.
21 7. Wade Dickinson, M.D. (“Dickinson”) is a medical doctor licensed to
22 practice medicine in the State of California with a specialty in obstetrics and gynecology, and at
23 all relevant times, was a shareholder, officer and director of OMNI.
24 8. Camilla Marquez, M.D. (“Marquez”) is a medical doctor licensed to
25 practice medicine in the State of California with a specialty in obstetrics and gynecology, and at
26 all relevant times, was a shareholder, officer and director of OMNI.
27 //1
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COMETAINT,
9. Dickinson and Marquez are not named as defendants in this lawsuit
because they and OMNI are parties to a pending arbitration arising out of and relating to many
of the matters that are alleged in this complaint.
10. Since it was formed in 1996, OMNI has provided its patients with
medical services in the areas of gynecology, obstetrics and other aspects of women’s health.
11. At all relevant times, all OMNI shareholders were members of OMNI’s
Board of Directors.
12. At all relevant times, all OMNI shareholders were officers of the
corporation.
10 13. At all relevant times, OMNI’s shareholder physicians were Dickinson,
11 Marquez, GROOMS, and non-parties Ron Lichtenstein, M.D. and Fenglaly Lee, M.D. (“Lee”)
12 (collectively, the “Shareholder Physicians”).
13 14. At all relevant times, OMNI hired separate non-OMNI shareholder, non-
14 physicians to serve in the roles of OMNI’s chief executive officer and chief operating officer.
15 15. At all relevant times, GROOMS was a shareholder physician at OMNI.
16 16. At all relevant times, GROOMS served on OMNI’s Board of Directors.
17 17. From 2001 through his resignation on July 29, 2016, GROOMS served
18 as OMNI’s President. According to OMNI’s bylaws, the President’s duties include “general
19 supervision, direction and control of the business and the officers of the Corporation.” As
20 President, GROOMS also had the “general powers and duties of management usually vested in
21 the office of President of a Corporation, and... such other powers and duties as may be
22 prescribed by the Board of Directors...”
23 18. At all relevant times, OMNI has operated in a manner in which each of
24 the Shareholder Physicians practice medicine in offices that are located in different areas of
25 Fresno, California, and which are physically separate and apart from the offices where OMNI
26 performs its administrative functions and ancillary services (e.g., laboratory, ultrasound,
27 urogynecology, etc.).
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19. Each of the Shareholder Physicians own their own practices and
equipment and operate their medical practices at separate locations in Fresno, California as
separate cost centers.
20. At all relevant times, as part of OMNI’s administrative functions,
revenues generated by the respective Shareholder Physicians’ practices were collected by
OMNI, and OMNI paid the expenses incurred by the Shareholder Physicians, subject to certain
repayment obligations of the Shareholder Physicians as alleged herein-below.
COMPENSATION STRUCTURE & COST CENTERS
21. Shareholder Physician compensation was subject to offset against any
10 balances existing in his or her “Shareholder Receivables Accounts”, which was treated as
11 liabilities each Shareholder Physician owes to OMNI. Each of the Shareholder Physicians
12 understood and agreed that they were responsible to OMNI to pay off their respective
13 Shareholder Receivables Accounts.
14 22. At all times relevant herein, GROOMS was aware that Shareholder
15 Physicians used credit cards to purchase business-related items and services that were utilized
16 in his or her practice. At all times relevant herein, GROOMS was also aware that Shareholder
17 Physicians used credit cards to purchase personal items. Upon receiving the Shareholder
18 Physicians’ credit card statements each month, OMNI paid off the balances.
19 23. The Shareholder Receivables Accounts were created by the Shareholder
20 Physicians and OMNI administration to identify how much money the Shareholder Physicians
21 were to reimburse OMNI for the personal expenses that OMNI paid on their behalf.
22 24. Being that the Shareholder Physicians owned their own practices and
23 equipment, business expenses that could not be expensed to the Shareholder Physicians’
24 respective cost centers were segregated into their respective Shareholder Receivables Accounts.
25 25. The Shareholder Physicians predominantly used their credit cards for
26 OMNI business expenses, but would periodically charge personal (i.e., non-OMNI business
27 related) items on their credit cards. OMNI administration paid these credit card statements in
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full as they came due, and assigned any personal expenses that appeared on those credit card
statements to the Shareholder Receivables Account of the Shareholder Physician who incurred
them. Any other personal/non-OMNI business expenses and individual cost center losses that
were incurred by the Shareholder Physicians were placed into the Shareholder Receivables
Account of the Shareholder Physician who incurred them with the agreement, understanding
and intention that the Shareholder Physicians must reimburse OMNI the amounts stated in their
respective Shareholder Receivables Accounts at the end of every OMNI fiscal year.
26. Traditionally, when earned by the Shareholder Physicians, OMNI
provided true-up reconciliation funds to the Shareholder Physicians as additional compensation
10 consistent with the Employee Compensation Formula set forth in their employment agreements
11 with OMNI (“Bonuses”), and those Bonuses were offset against the Shareholder Physicians’
12 respective Shareholder Receivables Accounts, thereby reimbursing OMNI and zeroing out the
13 Shareholder Receivables Accounts at OMNI’s financial year-end.
14 27. OMNI is informed, believes and thereon alleges that while serving as
15 OMNI”s President and as one of its Directors, within the past four years, GROOMS was aware
16 that certain Shareholder Physicians were operating their respective cost centers at a loss.
17 28. OMNI is informed, believes and thereon alleges that GROOMS actively
18 and intentionally kept the facts of arrears in the repayment of the Shareholder Receivable
19 Accounts of certain Shareholder Physicians and of certain Shareholder Physicians operating
20 cost centers at a loss hidden and secreted from the full OMNI Board of Directors and other
21 OMNI Shareholder Physicians. OMNI did not discover the existence of those wrongful acts
22 until September 21, 2016.
23 PROPOSED PHYSICIAN MANAGEMENT COMPANY
24 29. At various times from and after August 2015, the Shareholder Physicians
25 and OMNI’s Board of Directors discussed the idea of OMNI owning an interest in, and
26 becoming a part of, a Physician Management Company (“PMC”). The general idea behind a
27 PMC was that its owners would fund and set up the PMC services and recruit more physicians
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and physician groups to contract with the PMC for services that would include management,
billing and purchasing in exchange for payment to the PMC of a monthly fee. It was
anticipated that OMNI would contract with the PMC for such services.
30. In April 2016, OMNI’s chief executive officer spoke to OMNI’s Board
of Directors about the status of OMNI’s involvement with a PMC, OMNI Medical
Management, and a local hospital. The Board discussed issues regarding how the staffing
structure of OMNI would change as to its administrative and billing components.
31. In June 2016, OMNI’s chief executive officer notified OMNI’s Board of
Directors that if OMNI is the first contracted client in the new PMC, each Shareholder
10 Physician would be eligible to purchase a founder’s share of the PMC without dilution of
11 percentage owned in the future, and that the business plan for the PMC was then being
12 considered by a local hospital. A targeted start date for the PMC was in mid-September 2016.
13 OMNI’s Board of Directors did not make any decision at that time on whether to become
14 involved with the PMC.
15 32. GROOMS, Dickinson and Marquez were participants in a steering
16 committee for the proposed PMC. OMNI Board Member/Shareholder Lee expressed interest
17 in becoming part of that steering committee so she could learn more about the PMC and have
18 input on issues that concerned her about it. However, GROOMS, Dickinson and Marquez
19 denied Lee’s request to become a member of the committee because they said she had to first
20 be committed to joining the PMC, which was a commitment that she was not willing to make at
21 that time based upon the information then available to her.
22 33. OMNI is informed, believes and thereon alleges that as of no later than
23 early Summer 2016, GROOMS, Dickinson and Marquez had already decided to leave OMNI
24 and were meeting privately amongst themselves and to the exclusion of other OMNI Board
25 Members/Shareholder Physicians to conspire against and harm OMNI as they planned their
26 departures from the company to new medical groups and to raid key OMNI administrative
27 employees and billers in order to take them with them to the new PMC so it would be more
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COMPLAINT
likely to successfully operate, which would return a profit on the financial interests Dickinson
and Marquez had in that PMC.
SHAREHOLDER RECEIVABLES ACCOUNT
34.In general, only those Shareholder Physicians whose cost centers
operated at a profit received bonuses from OMNI.
35. Due to the fact that certain Shareholder Physicians’ cost centers were
operating in the negative (i.e., cost center income did not exceed the cost of operating the cost
center) during the past four years, OMNI has not been in a financial position that enabled it to
provide certain Shareholder Physicians with Bonuses.
10 36. OMNI is informed, believes and thereon alleges that certain Shareholder
11 Physicians did not earn Bonuses from OMNI at times within the past four years, and that the
12 Shareholder Receivables Accounts of certain Shareholder Physicians were not offset against,
13 and paid down from, Bonuses given to them during that time.
14 37. OMNI is informed, believes and thereon alleges that despite GROOMS’
15 knowledge of the agreement of the Shareholder Physicians to pay off their respective
16 Shareholder Receivable Accounts, GROOMS failed to ensure that the Shareholder Physicians
17 pay off their respective Shareholder Receivables Accounts during this time, and failed to notify
18 the full OMNI Board of Directors and all of the Shareholder Physicians that certain
19 Shareholder Physicians were not paying off their respective Shareholder Receivables Accounts
20 each year. As a result, the Shareholder Receivable Accounts of certain of the Shareholder
21 Physicians increased as certain of the Shareholder Physicians continued to incur personal and
22 business expenses that were paid by OMNI to the economic detriment of OMNI.
23 38. OMNI is informed, believes and thereon alleges that GROOMS
24 intentionally secreted and purposefully kept hidden from OMNI’s full Board of Directors and
25 OMNI’s other Shareholder Physicians the fact that certain Shareholder Physicians had
26 continuing growing unpaid balances in their Shareholder Receivables Accounts.
27 //1
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39. OMNI did not discover the fact that certain Shareholder Physicians had
continuing growing unpaid balances in their Shareholder Receivables Accounts and were not
paying off his Shareholder Receivables Accounts to OMNI until within the past three years. At
that time, OMNI discovered that certain Shareholder Physicians had amassed substantial
Shareholder Receivables Accounts owing to OMNI in amounts according to proof.
40. OMNI is informed, believes and thereon alleges that in April 2016, the
negative cost centers operated by certain Shareholder Physicians, coupled with certain
Shareholder Physicians’ failures to reimburse OMNI by paying off their respective Shareholder
Receivables Accounts, compounded by the expenses that OMNI was incurring as a result of
10 Dickinson’s relocation to his new office, caused OMNI to experience accrued cash flow
11 problems, including an overdraft in excess of $83,000 on OMNI’s corporate bank account.
12 OMNI is informed, believes and thereon alleges that GROOMS continued to keep information
13 about the negative cost centers, the substantial Shareholders Receivable Accounts and cash
14 flow problems hidden from OMNI’s full Board of Directors and OMNI’s other Shareholder
15 Physicians.
16 41. OMNI is informed, believes and thereon alleges that in July 2016,
17 OMNI’s cash flow was so limited that OMNI’s chief operating officer notified OMNI’s chief
18 executive officer, Dickinson, Marquez and GROOMS that due to the Shareholder Receivables
19 Account debts of certain Shareholder Physicians, OMNI did not have enough money to make
20 its payroll and that she wanted to utilize OMNI’s line of credit to obtain the funds necessary to
21 make payroll and to pay off the approximately $83,000 overdraft on OMNI’s corporate bank
22 account. OMNI is informed, believes and thereon alleges that GROOMS purposefully kept
23 that fact secret from OMNI’s full Board of Directors and OMNI’s other Shareholder
24 Physicians.
25 42. In 2008, OMNI’s Board of Directors approved applying for a line of
26 credit from OMNI’s bank due to the Board’s concerns that OMNI may periodically find itself
27 in need of emergency funds if it experienced a lack of reimbursement from Medi-Cal for
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COMPLAINT
services provided by OMNI. The Board voted to obtain a line of credit and that OMNI would
not draw from it unless and until the need to do so was first brought to the Board for its
decision. OMNI proceeded to obtain a line of credit with a $500,000 limit in 2008.
43. OMNI is informed, believes and thereon alleges that the July 2016
discussions between OMNI’s chief operating officer, OMNI’s chief executive officer,
Dickinson, Marquez and GROOMS about utilizing OMNI’s line of credit arose due to the cash
flow problems caused by certain Shareholder Physicians’ secret wrongful use of OMNI’s
economic resources, not as a result of a lack of reimbursement to OMNI from Medi-Cal.
Nevertheless, OMNI is informed, believes and thereon alleges that on or about July 7, 2016,
10 GROOMS (who was set to leave OMNI just three weeks later), authorized and approved a
11 $150,000 advance on OMNI’s line of credit without bringing the matter to OMNI’s Board of
12 Directors for approval and without otherwise notifying OMNI’s full Board of Directors and
13 OMNI’s other Physician Shareholders of the advance.
14 44, On October 2, 2017, OMNI was forced to pay off the principal balance
15 and interest totaling $121,624.43 on its line of credit. The principal balance of the line of credit
16 accrued interest at the rate of 6.5% per annum. Repayment of the line of credit wass
17 guaranteed by OMNI and the Shareholder Physicians via separate written commercial
18 guaranties to the lender. To date, GROOMS has not reimbursed OMNI for his shares of the
19 paid off balance.
20 OMNI’S DISCOVERY OF THE EXENT OF THE SHAREHOLDER RECEIVABLES
21 ACCOUNTS AND THE $150,000 ADVANCE ON OMNI’S LINE OF CREDIT
22 45.In September 2016, the amounts allocated to the Shareholder
23 Receivables Accounts of certain Shareholder Physicians came to the attention of all members
24 of OMNI’s Board of Directors.
25 46. In September 2016, the fact that OMNI obtained a $150,000 advance on
26 its line of credit in July 2016 came to the attention of all members of OMNI’s Board of
27 Directors.
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47. At the September 21, 2016 meeting of OMNI’s Board of Directors, the
Board passed a motion that required all Shareholder Physicians to reduce their respective
Shareholder Receivables Accounts by the end of 2016.
48. At the September 28, 2016 meeting of OMNI’s Board of Directors, the
Board passed a motion to offset the amount of money GROOMS’ would receive for his OMNI
stock by the amount of his Shareholder Receivables Account so as to zero out his Shareholder
Receivables Account.
RESIGNATION BY GROOMS AND OTHERS INVOLVED IN WRONGFUL
CONDUCT
10 49. On July 29, 2016, GROOMS’ resignation from OMNI became effective.
11 50. At the September 28, 2016 meeting of OMNI’s Board of Directors,
12 Dickinson and Marquez resigned from OMNI effective after the passage of 60 days. Dickinson
13 and Marquez’s last day at OMNI was November 27, 2016.
14 51. On October 3, 2016, OMNI’s chief operating officer, OMNNI’s business
15 services manager, and OMNI’s director of human resources notified OMNI that they were
16 resigning from OMNI with four weeks’ advance notice. Each of these individuals’ last day
17 working at OMNI was October 28, 2016.
18 POST-OMNI EMPLOYMENT & VENTURES
19 52. After leaving OMNI on November 27, 2016, Dickinson and Marquez
20 moved their practices to Valley Women’s Healthcare Medical Group.
21 53. After leaving OMNI on July 29, 2016, GROOMS moved his practice to
22 a local hospital.
23 POST-OMNI RESIGNATION ADMISSION BY GROOMS
24 54. In September 2016, GROOMS admitted that he owed OMNI the amount
25 allocated to his Shareholder Receivables Account by accepting an offset of that Account
26 against the money he received for his stock in OMNI.
27 ///
Dow! RON28 ome,
AFFORDABLE CARE ACT BLOCK PAYMENT ADJUSTMENTS
55. Under the Affordable Care Act, Medi-Cal made interim block payments
to all providers in 2013 and 2014. The payments that OMNI received were distributed to the
Shareholder Physicians on or about December 31, 2014.
56. OMNI is informed, believes and thereon alleges that GROOMS received
$111,426.65 in these interim payments.
57. In early 2018, Medi-Cal made adjustments to the interim block payments
resulting in a recoupment of funds from current payments due to OMNI. In total, Medi-Cal
9 withheld $282,497.24 in payments due OMNI to adjust for the Affordable Care Act interim
10 block payments.
11 58. OMNI is informed, believes and thereon alleges that the adjustments to
12 GROOMS’ interim payments totaled $67,174.67. These are funds that GROOMS was overpaid
13 in 2014 and were repaid by OMNI in 2018. GROOMS must reimburse that $67,174.67 sum to
14 OMNI.
15 MEDI-CAL REFUNDS RELATED TO OMNI’S LAB FEES
16 59. At all relevant times, the revenues generated by OMNI’s laboratory
17 services were divided equally between the Shareholder Physicians.
18 60. In February of 2019, OMNI was informed that Medi-Cal was requiring
19 refunds of laboratory fees paid between January 2012 and July 2015. As a result, OMNI was
20 required to refund Medi-Cal $126,059.29. These funds had already been paid out previously to
21 the Shareholder Physicians.
22 61. OMNI is informed, believes and thereon alleges that GROOMS had
23 previously received $25,211.86 of the money required to be refunded as part of his
24 compensation between January 2012 and July 2015.
25 62. OMNI is obligated to pay back $25,211.86 to Medi-Cal for revenue that
26 GROOMS has received and has been damaged in the same amount or according to proof.
27 GROOMS must reimburse that sum to OMNI.
DOWLING |. eaRon 8
COMPLAINT
ll
FIRST CAUSE OF ACTION
(Breach of Fiduciary Duty against GROOMS and DOES 1-25)
63. OMNI incorporates Paragraphs 1 through 62, inclusive, as though fully
set forth herein.
64. At all relevant times herein, GROOMS was a director, officer and
shareholder of OMNI, and on that basis, owed a fiduciary duty to OMNI.
65. At all relevant times herein, GROOMS participated in OMNI corporate
management and exercised discretionary authority.
66. As a director of OMNI, GROOMS owed OMNI a fiduciary duty of care
10 and a fiduciary duty of loyalty.
11 67. As an officer of OMNI, GROOMS owed OMNI a fiduciary duty of care
12 and a fiduciary duty of good faith.
13 68. In acting in the manner described above, GROOMS did not exercise the
14 care required of director, officer and shareholder fiduciary of OMNI in that he violated the
15 fiduciary duty he owed to OMNI including, but not limited to, the duty of care, the duty of
16 loyalty, the duty of good faith, the duty of full disclosure, and the duty of confidentiality.
17 69.OMNI is informed, believes and thereon alleges that GROOMS
18 knowingly violated his fiduciary duty to OMNI by, among other things:
19 a. Actively failing to disclose and keeping the fact of certain
20 Shareholder Physicians’ negatively-operating cost centers hidden
21 and secreted from the full OMNI Board of Directors and other of
22 OMNI’s Shareholder Physicians;
23 Intentionally secreting and purposefully keeping hidden from the
24 full OMNI Board of Directors and OMNI’s other Shareholder
25 Physicians the fact that certain Shareholder Physicians had
26 continually a growing unpaid balance in their Shareholder
27 Receivables Accounts;
DOWLING |. paso’28 COMPLAINT
12
Failing to ensure that Shareholder Receivables Accounts were
paid when due and to notify the full OMNI Board of Directors
and all Shareholder Physicians that all Shareholder Physicians’
accounts were not being paid off when due;
Obtaining a $150,000 advance on OMNI’s line of credit without
bringing the matter to OMNI’s Board of Directors for approval
and without notifying OMNI and the other Physician
Shareholders of the advance;
Failing to properly oversee the activities of OMNI’s accounting
10 department and OMNI’s financial books and records which
11 resulted in damage to OMNI;
12 Exposing OMNI to liability for the $150,000 advance on OMNI’s
13 line of credit under circumstances where his breaches of fiduciary
14 duty caused the cash flow problem that he claims gave rise to the
15 need for the advance;
16 Failing to reimburse OMNI for his share of the $121,624.43 that
17 OMNI paid on October 2, 2017 to pay off the balance of the line
18 of credit that GROOMS authorized on July 7, 2016;
19 Engaging in conduct that was competitive to OMNI before his
20 termination of employment/service as an OMNI director and
21 OMNI’s President by while still employed by/serving OMNI,
22 allowing for and failing to take measures to stop the setting up of
23 a competing medical group and theft of trade secrets and other
24 information owned by OMNI that he knew or should have known
25 was confidential and not a matter of general public knowledge;
26 and,
27
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COMPLAINT
L After beginning his employment at his new medical practice in
August 2016, GROOMS continued to bill one or more insurance
companies using OMNI's identity information.
70. As a direct and proximate result of GROOMS’ breaches of fiduciary
duties, OMNI has suffered past and future general, economic and consequential damages in an
amount that is in excess of California’s jurisdictional minimum limit for an unlimited civil
case, subject to proof at the time of trial.
71. OMNI is informed, believes and thereon alleges that the conduct of
GROOMS as alleged above was willful, deceitful and malicious such that GROOMS intended
10 to cause injury to OMNI. OMNI is further informed, believes and thereon alleges that
11 GROOMS engaged in such willful, deceitful and malicious conduct in conscious disregard for
12 the rights of OMNI and others. Punitive and/or exemplary damages, therefore, should be
13 awarded against GROOMS in an amount according to proof that is sufficient to punish them,
14 and to deter him and others from engaging in similar wrongful conduct in the future.
15 SECOND CAUSE OF ACTION
16 (Breach of Written Contract against GROOMS and DOES 1-25)
17 72. OMNI incorporates Paragraphs 1 through 62, and 64 through 71
18 inclusive, as though fully set forth herein.
19 73. OMNI and GROOMS entered into a written employment agreement.
20 (See Exhibit 1.)
21 74. OMNI has performed all conditions, covenants and promises required on
22 its behalf to be performed in accordance with the terms and conditions of that employment
23 agreement.
24 75. OMNI is informed, believes and thereon alleges that within the past four
25 years, GROOMS breached his employment agreement with OMNI by, among other things:
26 a. Engaging in activity competitive with and adverse to OMNI’s
27 business or practice;
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a
Borrowing money in the name of OMNI (i.e., obtaining the
$150,000 advance on OMNI’s line of credit) without seeking and
receiving express authorization from OMNI’s Board of Directors
and utilizing OMNI’s collateral (ic, OMNI’s commercial
guaranty) as well as the collateral from the other Shareholder
Physicians (i.e., the Shareholder Physicians’ commercial
guaranties) as security for the loan;
Keeping amounts of debts owing by certain Shareholder
Physicians under their respective Shareholder Receivables
10 Accounts and the existence of negatively operated cost centers by
11 certain Shareholder Physicians hidden and secret from OMNI’s
12 full Board of Directors and from certain other Shareholder
13 Physicians;
14 Making purchases in excess of Five Hundred Dollars ($500.00)
15 on behalf of his cost center that were not in the ordinary course of
16 business;
17 Withdrawing and using funds or other assets of OMNI for his
18 personal use;
19 Stealing, utilizing and/or failing to maintain the confidentiality of
20 OMNI’s trade secret information relating to OMNI’s medical
21 practice in a manner that seriously and adversely affected
22 OMNI’s business;
23 Divulging, disclosing and/or communicating OMNI’s trade
24 secrets to third parties;
25 Within three years following the termination of his employment
26 from OMNI, soliciting, inducing and attempting to influence
27 OMNI employees who did not provide services primarily under
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the supervision of GROOMS to terminate their relationship with
OMNI, and,
1 Engaging in unfair competition with OMNI.
76. As a result of GROOMS’ breaches of his employment agreement with
OMNI, OMNI has been damaged in an amount that is in excess of California’s jurisdictional
minimum limit for an unlimited civil case, subject to proof at the time of trial.
THIRD CAUSE OF ACTION
(Constructive Trust against GROOMS and DOES 1-25)
77. OMNI incorporates Paragraphs 1 through 62, 64 through 71 and 73
10 through 76 inclusive, as though fully set forth herein.
11 78. OMNI is informed, believes and thereon alleges, that as a result of his
12 wrongful acts and omissions, GROOMS has wrongfully acquired and/or detained certain
13 existing property to which OMNI has a right, including but not limited to: (i) the amounts that
14 GROOMS was overpaid out of the Affordable Care Act block payments in 2014 and (ii) the
15 amounts that GROOMS owes for his shares of the laboratory fees being refunded by OMNI.
16 79. OMNI is informed and believes, and thereon alleges, that GROOMS is
17 not entitled to reap the benefits of those monies and it would be unjust and inequitable for
18 GROOMS to retain them. OMNI is therefore entitled to restitution and/or disgorgement of
19 said monies and other benefits in amounts according to proof at trial but in an amount no less
20 than $92,386.53, and thus GROOMS hold those funds in constructive trust for OMNI.
21 80. To date, GROOMS has failed to return those funds held in constructive
22 trust for OMNI further causing OMNI damages according to proof at trial.
23 FOURTH CAUSE OF ACTION
24 (Unjust Enrichment against GROOMS and DOES 1-25)
25 81. OMNI incorporates Paragraphs | through 62, 64 through 71, 73 through
26 76 and 78 through 80 inclusive, as though fully set forth herein.
27 M11
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COMFEAIN
82. OMNI is informed, believes and thereon alleges, that as a result of his
wrongful acts and omissions, GROOMS has wrongfully acquired and/or detained certain
existing property to which OMNI has a right, including but not limited to: (i) the amounts that
GROOMS was overpaid out of the Affordable Care Act block payments in 2014 and (ii) the
amounts that GROOMS owes for his shares of refunded laboratory fees.
83. OMNI is informed and believes, and thereon alleges, that GROOMS is
not entitled to reap the benefits of the monies and it would be unjust and inequitable for
GROOMS to retain them. OMNI is therefore entitled to restitution and/or disgorgement of said
revenues, earnings, compensation, and other benefits in amounts according to proof at trial but
10 in an amount no less than $92,386.53.
11 84. To date, GROOMS has failed to return those funds held unjustly and
12 inequitably for OMNI further causing OMNI damages according to proof at trial.
13 FIFTH CAUSE OF ACTION
14 (Fraud and Deceit — Suppression and Concealment of Material Facts against GROOMS
15 and DOES 1-25)
16 85. OMNI incorporates Paragraphs 1 through 62, 64 through 71, 73 through
17 76, 78 through 80 and 82 through 84 inclusive, as though fully set forth herein.
18 86. As an OMNI Board Member and OMNI officer, GROOMS owed OMNI
19 a fiduciary duty.
20 87. Suppression or concealment of a material fact by a fiduciary such as
21 GROOMS constitutes actionable fraud.
22 88. At all relevant times mentioned herein, OMNI’s Board of Directors held
23 monthly meetings and GROOMS attended most every one of them. The topic of OMNI’s
24 finances was discussed by the Board of Directors at each of those meetings.
25 89. As alleged hereinabove, OMNI is informed, believes and thereon alleges
26 that GROOMS suppressed, concealed and failed to disclose to OMNI many material facts,
27 including but not limited to the following:
DO 28
COMPLAINT
a. Actively failing to disclose and keeping the fact of certain
Shareholder Physicians’ negatively-operating cost centers hidden
and secreted from the full OMNI Board of Directors and other of
OMNI’s Shareholder Physicians;
The fact that he intentionally secreted and purposefully kept
hidden from the OMNI Board of Directors the fact that certain
Shareholder Physicians had continually growing unpaid balances
in their Shareholder Receivables Account that were due and
owing to OMNI; and,
10 Obtaining a $150,000 advance on OMNI’s line of credit without
11 bringing the matter to OMNI’s Board of Directors for approval
12 and without notifying OMNI and the other Physician
13 Shareholders of the advance, thereby exposing OMNI to liability
14 for the $150,000 advance on OMNI’s line of credit under
15 circumstances where his breaches of fiduciary duty caused the
16 cash flow problem that he claimed gave rise to the need for the
17 advance.
18 90. The suppression and concealment of the aforementioned material facts,
19 which were known to GROOMS during the OMNI Board Meetings was likely to, and did in
20 fact mislead OMNI in the light of other representations GROOMS made concerning the
21 financial condition of OMNI.
22 91. The failures to disclose information and suppressions of information
23 herein alleged to have been made by GROOMS were made with the intent to hide and distract
24 OMNI from the true facts of GROOMS’ harmful conduct and induce OMNI to act in a manner
25 that would enable him to continue to take advantage of OMNI through his secret bad acts.
26 92. OMNI, at the time these failures to disclose and suppressions of facts
27 occurred, and at the time OMNI took the actions herein alleged, was ignorant of the existence
28
COMET AINT
of the facts that GROOMS suppressed and failed to disclose. If OMNI would have been aware
of the existence of the facts not disclosed by GROOMS, OMNI would not have, as it did, relied
on the completeness and accuracy of the statements OMNI fiduciary GROOMS made during
OMNI Board of Directors meetings and otherwise concerning the financial condition of OMNI.
93. As a proximate result of the fraudulent conduct of GROOMS as alleged
hereinabove, OMNI was induced to, among other things, accept the financial information
GROOMS furnished to OMNI’s Board of Directors as accurate and compl
Preview
DAVID D. SCHNEIDER # 211498 E-FILED N. RICHARD SHREIBA #315509 7/29/2019 5:32 PM DOWLING AARON INCORPORATED Superior Court of California 8080 N. Palm Avenue, Third Floor County of Fresno Fresno, CA 93711 By: A. Rodriguez, Deputy (P.O. Box 28902, Fresno, CA 93729) 559-432-4500 Tel. 559-432-4590 Fax dschneider@dowlingaaron.com rshreiba@dowlingaaron.com Attorneys for Plaintiff OMNI WOMEN’S HEALTH MEDICAL GROUP, INC. SUPERIOR COURT OF CALIFORNIA, COUNTY OF FRESNO CENTRAL DIVISION 10 11 OMNI WOMEN’S HEALTH MEDICAL Case No. 19CECG02730 12 GROUP, INC., COMPLAINT FOR BREACH OF 13 Plaintiff, FIDUCIARY DUTY; BREACH OF WRITTEN CONTRACT; 14 Vv. CONSTRUCTIVE TRUST; UNJUST ENRICHMENT; FRAUD AND DECEIT — 15 HAROLD GROOMS, M.D.; AND DOES 1- SUPPRESSION AND CONCEALMENT OF 25, MATERIAL FACTS 16 Defendants. 17 18 Plaintiff OMNI WOMEN’S HEALTH MEDICAL GROUP, INC. (hereinafter, 19 "Plaintiff" or “OMNT”) alleges: 20 PARTIES 21 1 Plaintiff is, and at all times mentioned herein was, a California 22 corporation, doing business in the County of Fresno, State of California. 23 2. Plaintiff is informed and believes that defendant Harold Grooms, M.D. 24 (hereinafter, “GROOMS’”) is, and at all times mentioned herein was, an individual residing in 25 Fresno County, California. 26 3. Plaintiff is unaware of the true names and capacities of defendants sued 27 herein as DOES 1 — 25 and thus sues said parties by such fictitious names. Upon ascertaining 28 their true names and capacities, Plaintiff will amend this Complaint to set forth the same DO" COMPLAINT together with appropriate charging allegations. Plaintiff is informed, believes and thereon alleges that each of the fictitiously-named defendants is in some manner responsible for the events and happenings referred to herein, and thereby proximately and foreseeably caused damage to Plaintiff as alleged herein. 4. Plaintiff is informed, believes and thereon alleges that each of the defendants herein was the agent, servant, or employee of each of the remaining defendants, and that at all times herein mentioned each was acting within the scope of such agency and employment and for the mutual benefit or for the benefit of one or more of the defendants named herein. 10 GENERAL ALLEGATIONS 11 5. OMNI is a professional medical corporation organized and existing 12 under the laws of the State of California. 13 6. GROOMS is a medical doctor licensed to practice medicine in the State 14 of California with a specialty in obstetrics and gynecology, and was a shareholder, officer and 15 director of OMNI. At all relevant times through July 29, 2016, GROOMS was an OMNI 16 shareholder and provided professional medical services at OMNI. At all relevant times through 17 July 29, 2016, GROOMS owed fiduciary, contractual and other duties and obligations to 18 OMNI. GROOMS provided professional medical services at OMNI pursuant to an 19 Employment Agreement effective October 17, 2000, a true and correct copy of which is 20 attached hereto as Exhibit “1”. 21 7. Wade Dickinson, M.D. (“Dickinson”) is a medical doctor licensed to 22 practice medicine in the State of California with a specialty in obstetrics and gynecology, and at 23 all relevant times, was a shareholder, officer and director of OMNI. 24 8. Camilla Marquez, M.D. (“Marquez”) is a medical doctor licensed to 25 practice medicine in the State of California with a specialty in obstetrics and gynecology, and at 26 all relevant times, was a shareholder, officer and director of OMNI. 27 //1 Do 28 COMETAINT, 9. Dickinson and Marquez are not named as defendants in this lawsuit because they and OMNI are parties to a pending arbitration arising out of and relating to many of the matters that are alleged in this complaint. 10. Since it was formed in 1996, OMNI has provided its patients with medical services in the areas of gynecology, obstetrics and other aspects of women’s health. 11. At all relevant times, all OMNI shareholders were members of OMNI’s Board of Directors. 12. At all relevant times, all OMNI shareholders were officers of the corporation. 10 13. At all relevant times, OMNI’s shareholder physicians were Dickinson, 11 Marquez, GROOMS, and non-parties Ron Lichtenstein, M.D. and Fenglaly Lee, M.D. (“Lee”) 12 (collectively, the “Shareholder Physicians”). 13 14. At all relevant times, OMNI hired separate non-OMNI shareholder, non- 14 physicians to serve in the roles of OMNI’s chief executive officer and chief operating officer. 15 15. At all relevant times, GROOMS was a shareholder physician at OMNI. 16 16. At all relevant times, GROOMS served on OMNI’s Board of Directors. 17 17. From 2001 through his resignation on July 29, 2016, GROOMS served 18 as OMNI’s President. According to OMNI’s bylaws, the President’s duties include “general 19 supervision, direction and control of the business and the officers of the Corporation.” As 20 President, GROOMS also had the “general powers and duties of management usually vested in 21 the office of President of a Corporation, and... such other powers and duties as may be 22 prescribed by the Board of Directors...” 23 18. At all relevant times, OMNI has operated in a manner in which each of 24 the Shareholder Physicians practice medicine in offices that are located in different areas of 25 Fresno, California, and which are physically separate and apart from the offices where OMNI 26 performs its administrative functions and ancillary services (e.g., laboratory, ultrasound, 27 urogynecology, etc.). Do 28 coMraNr 19. Each of the Shareholder Physicians own their own practices and equipment and operate their medical practices at separate locations in Fresno, California as separate cost centers. 20. At all relevant times, as part of OMNI’s administrative functions, revenues generated by the respective Shareholder Physicians’ practices were collected by OMNI, and OMNI paid the expenses incurred by the Shareholder Physicians, subject to certain repayment obligations of the Shareholder Physicians as alleged herein-below. COMPENSATION STRUCTURE & COST CENTERS 21. Shareholder Physician compensation was subject to offset against any 10 balances existing in his or her “Shareholder Receivables Accounts”, which was treated as 11 liabilities each Shareholder Physician owes to OMNI. Each of the Shareholder Physicians 12 understood and agreed that they were responsible to OMNI to pay off their respective 13 Shareholder Receivables Accounts. 14 22. At all times relevant herein, GROOMS was aware that Shareholder 15 Physicians used credit cards to purchase business-related items and services that were utilized 16 in his or her practice. At all times relevant herein, GROOMS was also aware that Shareholder 17 Physicians used credit cards to purchase personal items. Upon receiving the Shareholder 18 Physicians’ credit card statements each month, OMNI paid off the balances. 19 23. The Shareholder Receivables Accounts were created by the Shareholder 20 Physicians and OMNI administration to identify how much money the Shareholder Physicians 21 were to reimburse OMNI for the personal expenses that OMNI paid on their behalf. 22 24. Being that the Shareholder Physicians owned their own practices and 23 equipment, business expenses that could not be expensed to the Shareholder Physicians’ 24 respective cost centers were segregated into their respective Shareholder Receivables Accounts. 25 25. The Shareholder Physicians predominantly used their credit cards for 26 OMNI business expenses, but would periodically charge personal (i.e., non-OMNI business 27 related) items on their credit cards. OMNI administration paid these credit card statements in DO" 28 SoMEreINt full as they came due, and assigned any personal expenses that appeared on those credit card statements to the Shareholder Receivables Account of the Shareholder Physician who incurred them. Any other personal/non-OMNI business expenses and individual cost center losses that were incurred by the Shareholder Physicians were placed into the Shareholder Receivables Account of the Shareholder Physician who incurred them with the agreement, understanding and intention that the Shareholder Physicians must reimburse OMNI the amounts stated in their respective Shareholder Receivables Accounts at the end of every OMNI fiscal year. 26. Traditionally, when earned by the Shareholder Physicians, OMNI provided true-up reconciliation funds to the Shareholder Physicians as additional compensation 10 consistent with the Employee Compensation Formula set forth in their employment agreements 11 with OMNI (“Bonuses”), and those Bonuses were offset against the Shareholder Physicians’ 12 respective Shareholder Receivables Accounts, thereby reimbursing OMNI and zeroing out the 13 Shareholder Receivables Accounts at OMNI’s financial year-end. 14 27. OMNI is informed, believes and thereon alleges that while serving as 15 OMNI”s President and as one of its Directors, within the past four years, GROOMS was aware 16 that certain Shareholder Physicians were operating their respective cost centers at a loss. 17 28. OMNI is informed, believes and thereon alleges that GROOMS actively 18 and intentionally kept the facts of arrears in the repayment of the Shareholder Receivable 19 Accounts of certain Shareholder Physicians and of certain Shareholder Physicians operating 20 cost centers at a loss hidden and secreted from the full OMNI Board of Directors and other 21 OMNI Shareholder Physicians. OMNI did not discover the existence of those wrongful acts 22 until September 21, 2016. 23 PROPOSED PHYSICIAN MANAGEMENT COMPANY 24 29. At various times from and after August 2015, the Shareholder Physicians 25 and OMNI’s Board of Directors discussed the idea of OMNI owning an interest in, and 26 becoming a part of, a Physician Management Company (“PMC”). The general idea behind a 27 PMC was that its owners would fund and set up the PMC services and recruit more physicians DO’ 28 CoMtraINr and physician groups to contract with the PMC for services that would include management, billing and purchasing in exchange for payment to the PMC of a monthly fee. It was anticipated that OMNI would contract with the PMC for such services. 30. In April 2016, OMNI’s chief executive officer spoke to OMNI’s Board of Directors about the status of OMNI’s involvement with a PMC, OMNI Medical Management, and a local hospital. The Board discussed issues regarding how the staffing structure of OMNI would change as to its administrative and billing components. 31. In June 2016, OMNI’s chief executive officer notified OMNI’s Board of Directors that if OMNI is the first contracted client in the new PMC, each Shareholder 10 Physician would be eligible to purchase a founder’s share of the PMC without dilution of 11 percentage owned in the future, and that the business plan for the PMC was then being 12 considered by a local hospital. A targeted start date for the PMC was in mid-September 2016. 13 OMNI’s Board of Directors did not make any decision at that time on whether to become 14 involved with the PMC. 15 32. GROOMS, Dickinson and Marquez were participants in a steering 16 committee for the proposed PMC. OMNI Board Member/Shareholder Lee expressed interest 17 in becoming part of that steering committee so she could learn more about the PMC and have 18 input on issues that concerned her about it. However, GROOMS, Dickinson and Marquez 19 denied Lee’s request to become a member of the committee because they said she had to first 20 be committed to joining the PMC, which was a commitment that she was not willing to make at 21 that time based upon the information then available to her. 22 33. OMNI is informed, believes and thereon alleges that as of no later than 23 early Summer 2016, GROOMS, Dickinson and Marquez had already decided to leave OMNI 24 and were meeting privately amongst themselves and to the exclusion of other OMNI Board 25 Members/Shareholder Physicians to conspire against and harm OMNI as they planned their 26 departures from the company to new medical groups and to raid key OMNI administrative 27 employees and billers in order to take them with them to the new PMC so it would be more Do 28 COMPLAINT likely to successfully operate, which would return a profit on the financial interests Dickinson and Marquez had in that PMC. SHAREHOLDER RECEIVABLES ACCOUNT 34.In general, only those Shareholder Physicians whose cost centers operated at a profit received bonuses from OMNI. 35. Due to the fact that certain Shareholder Physicians’ cost centers were operating in the negative (i.e., cost center income did not exceed the cost of operating the cost center) during the past four years, OMNI has not been in a financial position that enabled it to provide certain Shareholder Physicians with Bonuses. 10 36. OMNI is informed, believes and thereon alleges that certain Shareholder 11 Physicians did not earn Bonuses from OMNI at times within the past four years, and that the 12 Shareholder Receivables Accounts of certain Shareholder Physicians were not offset against, 13 and paid down from, Bonuses given to them during that time. 14 37. OMNI is informed, believes and thereon alleges that despite GROOMS’ 15 knowledge of the agreement of the Shareholder Physicians to pay off their respective 16 Shareholder Receivable Accounts, GROOMS failed to ensure that the Shareholder Physicians 17 pay off their respective Shareholder Receivables Accounts during this time, and failed to notify 18 the full OMNI Board of Directors and all of the Shareholder Physicians that certain 19 Shareholder Physicians were not paying off their respective Shareholder Receivables Accounts 20 each year. As a result, the Shareholder Receivable Accounts of certain of the Shareholder 21 Physicians increased as certain of the Shareholder Physicians continued to incur personal and 22 business expenses that were paid by OMNI to the economic detriment of OMNI. 23 38. OMNI is informed, believes and thereon alleges that GROOMS 24 intentionally secreted and purposefully kept hidden from OMNI’s full Board of Directors and 25 OMNI’s other Shareholder Physicians the fact that certain Shareholder Physicians had 26 continuing growing unpaid balances in their Shareholder Receivables Accounts. 27 //1 Do! RON’28 COMETAINT 39. OMNI did not discover the fact that certain Shareholder Physicians had continuing growing unpaid balances in their Shareholder Receivables Accounts and were not paying off his Shareholder Receivables Accounts to OMNI until within the past three years. At that time, OMNI discovered that certain Shareholder Physicians had amassed substantial Shareholder Receivables Accounts owing to OMNI in amounts according to proof. 40. OMNI is informed, believes and thereon alleges that in April 2016, the negative cost centers operated by certain Shareholder Physicians, coupled with certain Shareholder Physicians’ failures to reimburse OMNI by paying off their respective Shareholder Receivables Accounts, compounded by the expenses that OMNI was incurring as a result of 10 Dickinson’s relocation to his new office, caused OMNI to experience accrued cash flow 11 problems, including an overdraft in excess of $83,000 on OMNI’s corporate bank account. 12 OMNI is informed, believes and thereon alleges that GROOMS continued to keep information 13 about the negative cost centers, the substantial Shareholders Receivable Accounts and cash 14 flow problems hidden from OMNI’s full Board of Directors and OMNI’s other Shareholder 15 Physicians. 16 41. OMNI is informed, believes and thereon alleges that in July 2016, 17 OMNI’s cash flow was so limited that OMNI’s chief operating officer notified OMNI’s chief 18 executive officer, Dickinson, Marquez and GROOMS that due to the Shareholder Receivables 19 Account debts of certain Shareholder Physicians, OMNI did not have enough money to make 20 its payroll and that she wanted to utilize OMNI’s line of credit to obtain the funds necessary to 21 make payroll and to pay off the approximately $83,000 overdraft on OMNI’s corporate bank 22 account. OMNI is informed, believes and thereon alleges that GROOMS purposefully kept 23 that fact secret from OMNI’s full Board of Directors and OMNI’s other Shareholder 24 Physicians. 25 42. In 2008, OMNI’s Board of Directors approved applying for a line of 26 credit from OMNI’s bank due to the Board’s concerns that OMNI may periodically find itself 27 in need of emergency funds if it experienced a lack of reimbursement from Medi-Cal for DO 28 COMPLAINT services provided by OMNI. The Board voted to obtain a line of credit and that OMNI would not draw from it unless and until the need to do so was first brought to the Board for its decision. OMNI proceeded to obtain a line of credit with a $500,000 limit in 2008. 43. OMNI is informed, believes and thereon alleges that the July 2016 discussions between OMNI’s chief operating officer, OMNI’s chief executive officer, Dickinson, Marquez and GROOMS about utilizing OMNI’s line of credit arose due to the cash flow problems caused by certain Shareholder Physicians’ secret wrongful use of OMNI’s economic resources, not as a result of a lack of reimbursement to OMNI from Medi-Cal. Nevertheless, OMNI is informed, believes and thereon alleges that on or about July 7, 2016, 10 GROOMS (who was set to leave OMNI just three weeks later), authorized and approved a 11 $150,000 advance on OMNI’s line of credit without bringing the matter to OMNI’s Board of 12 Directors for approval and without otherwise notifying OMNI’s full Board of Directors and 13 OMNI’s other Physician Shareholders of the advance. 14 44, On October 2, 2017, OMNI was forced to pay off the principal balance 15 and interest totaling $121,624.43 on its line of credit. The principal balance of the line of credit 16 accrued interest at the rate of 6.5% per annum. Repayment of the line of credit wass 17 guaranteed by OMNI and the Shareholder Physicians via separate written commercial 18 guaranties to the lender. To date, GROOMS has not reimbursed OMNI for his shares of the 19 paid off balance. 20 OMNI’S DISCOVERY OF THE EXENT OF THE SHAREHOLDER RECEIVABLES 21 ACCOUNTS AND THE $150,000 ADVANCE ON OMNI’S LINE OF CREDIT 22 45.In September 2016, the amounts allocated to the Shareholder 23 Receivables Accounts of certain Shareholder Physicians came to the attention of all members 24 of OMNI’s Board of Directors. 25 46. In September 2016, the fact that OMNI obtained a $150,000 advance on 26 its line of credit in July 2016 came to the attention of all members of OMNI’s Board of 27 Directors. DO} ON28 SOMELAINT 47. At the September 21, 2016 meeting of OMNI’s Board of Directors, the Board passed a motion that required all Shareholder Physicians to reduce their respective Shareholder Receivables Accounts by the end of 2016. 48. At the September 28, 2016 meeting of OMNI’s Board of Directors, the Board passed a motion to offset the amount of money GROOMS’ would receive for his OMNI stock by the amount of his Shareholder Receivables Account so as to zero out his Shareholder Receivables Account. RESIGNATION BY GROOMS AND OTHERS INVOLVED IN WRONGFUL CONDUCT 10 49. On July 29, 2016, GROOMS’ resignation from OMNI became effective. 11 50. At the September 28, 2016 meeting of OMNI’s Board of Directors, 12 Dickinson and Marquez resigned from OMNI effective after the passage of 60 days. Dickinson 13 and Marquez’s last day at OMNI was November 27, 2016. 14 51. On October 3, 2016, OMNI’s chief operating officer, OMNNI’s business 15 services manager, and OMNI’s director of human resources notified OMNI that they were 16 resigning from OMNI with four weeks’ advance notice. Each of these individuals’ last day 17 working at OMNI was October 28, 2016. 18 POST-OMNI EMPLOYMENT & VENTURES 19 52. After leaving OMNI on November 27, 2016, Dickinson and Marquez 20 moved their practices to Valley Women’s Healthcare Medical Group. 21 53. After leaving OMNI on July 29, 2016, GROOMS moved his practice to 22 a local hospital. 23 POST-OMNI RESIGNATION ADMISSION BY GROOMS 24 54. In September 2016, GROOMS admitted that he owed OMNI the amount 25 allocated to his Shareholder Receivables Account by accepting an offset of that Account 26 against the money he received for his stock in OMNI. 27 /// Dow! RON28 ome, AFFORDABLE CARE ACT BLOCK PAYMENT ADJUSTMENTS 55. Under the Affordable Care Act, Medi-Cal made interim block payments to all providers in 2013 and 2014. The payments that OMNI received were distributed to the Shareholder Physicians on or about December 31, 2014. 56. OMNI is informed, believes and thereon alleges that GROOMS received $111,426.65 in these interim payments. 57. In early 2018, Medi-Cal made adjustments to the interim block payments resulting in a recoupment of funds from current payments due to OMNI. In total, Medi-Cal 9 withheld $282,497.24 in payments due OMNI to adjust for the Affordable Care Act interim 10 block payments. 11 58. OMNI is informed, believes and thereon alleges that the adjustments to 12 GROOMS’ interim payments totaled $67,174.67. These are funds that GROOMS was overpaid 13 in 2014 and were repaid by OMNI in 2018. GROOMS must reimburse that $67,174.67 sum to 14 OMNI. 15 MEDI-CAL REFUNDS RELATED TO OMNI’S LAB FEES 16 59. At all relevant times, the revenues generated by OMNI’s laboratory 17 services were divided equally between the Shareholder Physicians. 18 60. In February of 2019, OMNI was informed that Medi-Cal was requiring 19 refunds of laboratory fees paid between January 2012 and July 2015. As a result, OMNI was 20 required to refund Medi-Cal $126,059.29. These funds had already been paid out previously to 21 the Shareholder Physicians. 22 61. OMNI is informed, believes and thereon alleges that GROOMS had 23 previously received $25,211.86 of the money required to be refunded as part of his 24 compensation between January 2012 and July 2015. 25 62. OMNI is obligated to pay back $25,211.86 to Medi-Cal for revenue that 26 GROOMS has received and has been damaged in the same amount or according to proof. 27 GROOMS must reimburse that sum to OMNI. DOWLING |. eaRon 8 COMPLAINT ll FIRST CAUSE OF ACTION (Breach of Fiduciary Duty against GROOMS and DOES 1-25) 63. OMNI incorporates Paragraphs 1 through 62, inclusive, as though fully set forth herein. 64. At all relevant times herein, GROOMS was a director, officer and shareholder of OMNI, and on that basis, owed a fiduciary duty to OMNI. 65. At all relevant times herein, GROOMS participated in OMNI corporate management and exercised discretionary authority. 66. As a director of OMNI, GROOMS owed OMNI a fiduciary duty of care 10 and a fiduciary duty of loyalty. 11 67. As an officer of OMNI, GROOMS owed OMNI a fiduciary duty of care 12 and a fiduciary duty of good faith. 13 68. In acting in the manner described above, GROOMS did not exercise the 14 care required of director, officer and shareholder fiduciary of OMNI in that he violated the 15 fiduciary duty he owed to OMNI including, but not limited to, the duty of care, the duty of 16 loyalty, the duty of good faith, the duty of full disclosure, and the duty of confidentiality. 17 69.OMNI is informed, believes and thereon alleges that GROOMS 18 knowingly violated his fiduciary duty to OMNI by, among other things: 19 a. Actively failing to disclose and keeping the fact of certain 20 Shareholder Physicians’ negatively-operating cost centers hidden 21 and secreted from the full OMNI Board of Directors and other of 22 OMNI’s Shareholder Physicians; 23 Intentionally secreting and purposefully keeping hidden from the 24 full OMNI Board of Directors and OMNI’s other Shareholder 25 Physicians the fact that certain Shareholder Physicians had 26 continually a growing unpaid balance in their Shareholder 27 Receivables Accounts; DOWLING |. paso’28 COMPLAINT 12 Failing to ensure that Shareholder Receivables Accounts were paid when due and to notify the full OMNI Board of Directors and all Shareholder Physicians that all Shareholder Physicians’ accounts were not being paid off when due; Obtaining a $150,000 advance on OMNI’s line of credit without bringing the matter to OMNI’s Board of Directors for approval and without notifying OMNI and the other Physician Shareholders of the advance; Failing to properly oversee the activities of OMNI’s accounting 10 department and OMNI’s financial books and records which 11 resulted in damage to OMNI; 12 Exposing OMNI to liability for the $150,000 advance on OMNI’s 13 line of credit under circumstances where his breaches of fiduciary 14 duty caused the cash flow problem that he claims gave rise to the 15 need for the advance; 16 Failing to reimburse OMNI for his share of the $121,624.43 that 17 OMNI paid on October 2, 2017 to pay off the balance of the line 18 of credit that GROOMS authorized on July 7, 2016; 19 Engaging in conduct that was competitive to OMNI before his 20 termination of employment/service as an OMNI director and 21 OMNI’s President by while still employed by/serving OMNI, 22 allowing for and failing to take measures to stop the setting up of 23 a competing medical group and theft of trade secrets and other 24 information owned by OMNI that he knew or should have known 25 was confidential and not a matter of general public knowledge; 26 and, 27 Do\ 28 COMPLAINT L After beginning his employment at his new medical practice in August 2016, GROOMS continued to bill one or more insurance companies using OMNI's identity information. 70. As a direct and proximate result of GROOMS’ breaches of fiduciary duties, OMNI has suffered past and future general, economic and consequential damages in an amount that is in excess of California’s jurisdictional minimum limit for an unlimited civil case, subject to proof at the time of trial. 71. OMNI is informed, believes and thereon alleges that the conduct of GROOMS as alleged above was willful, deceitful and malicious such that GROOMS intended 10 to cause injury to OMNI. OMNI is further informed, believes and thereon alleges that 11 GROOMS engaged in such willful, deceitful and malicious conduct in conscious disregard for 12 the rights of OMNI and others. Punitive and/or exemplary damages, therefore, should be 13 awarded against GROOMS in an amount according to proof that is sufficient to punish them, 14 and to deter him and others from engaging in similar wrongful conduct in the future. 15 SECOND CAUSE OF ACTION 16 (Breach of Written Contract against GROOMS and DOES 1-25) 17 72. OMNI incorporates Paragraphs 1 through 62, and 64 through 71 18 inclusive, as though fully set forth herein. 19 73. OMNI and GROOMS entered into a written employment agreement. 20 (See Exhibit 1.) 21 74. OMNI has performed all conditions, covenants and promises required on 22 its behalf to be performed in accordance with the terms and conditions of that employment 23 agreement. 24 75. OMNI is informed, believes and thereon alleges that within the past four 25 years, GROOMS breached his employment agreement with OMNI by, among other things: 26 a. Engaging in activity competitive with and adverse to OMNI’s 27 business or practice; DON 28 a Borrowing money in the name of OMNI (i.e., obtaining the $150,000 advance on OMNI’s line of credit) without seeking and receiving express authorization from OMNI’s Board of Directors and utilizing OMNI’s collateral (ic, OMNI’s commercial guaranty) as well as the collateral from the other Shareholder Physicians (i.e., the Shareholder Physicians’ commercial guaranties) as security for the loan; Keeping amounts of debts owing by certain Shareholder Physicians under their respective Shareholder Receivables 10 Accounts and the existence of negatively operated cost centers by 11 certain Shareholder Physicians hidden and secret from OMNI’s 12 full Board of Directors and from certain other Shareholder 13 Physicians; 14 Making purchases in excess of Five Hundred Dollars ($500.00) 15 on behalf of his cost center that were not in the ordinary course of 16 business; 17 Withdrawing and using funds or other assets of OMNI for his 18 personal use; 19 Stealing, utilizing and/or failing to maintain the confidentiality of 20 OMNI’s trade secret information relating to OMNI’s medical 21 practice in a manner that seriously and adversely affected 22 OMNI’s business; 23 Divulging, disclosing and/or communicating OMNI’s trade 24 secrets to third parties; 25 Within three years following the termination of his employment 26 from OMNI, soliciting, inducing and attempting to influence 27 OMNI employees who did not provide services primarily under DO" 28 ot the supervision of GROOMS to terminate their relationship with OMNI, and, 1 Engaging in unfair competition with OMNI. 76. As a result of GROOMS’ breaches of his employment agreement with OMNI, OMNI has been damaged in an amount that is in excess of California’s jurisdictional minimum limit for an unlimited civil case, subject to proof at the time of trial. THIRD CAUSE OF ACTION (Constructive Trust against GROOMS and DOES 1-25) 77. OMNI incorporates Paragraphs 1 through 62, 64 through 71 and 73 10 through 76 inclusive, as though fully set forth herein. 11 78. OMNI is informed, believes and thereon alleges, that as a result of his 12 wrongful acts and omissions, GROOMS has wrongfully acquired and/or detained certain 13 existing property to which OMNI has a right, including but not limited to: (i) the amounts that 14 GROOMS was overpaid out of the Affordable Care Act block payments in 2014 and (ii) the 15 amounts that GROOMS owes for his shares of the laboratory fees being refunded by OMNI. 16 79. OMNI is informed and believes, and thereon alleges, that GROOMS is 17 not entitled to reap the benefits of those monies and it would be unjust and inequitable for 18 GROOMS to retain them. OMNI is therefore entitled to restitution and/or disgorgement of 19 said monies and other benefits in amounts according to proof at trial but in an amount no less 20 than $92,386.53, and thus GROOMS hold those funds in constructive trust for OMNI. 21 80. To date, GROOMS has failed to return those funds held in constructive 22 trust for OMNI further causing OMNI damages according to proof at trial. 23 FOURTH CAUSE OF ACTION 24 (Unjust Enrichment against GROOMS and DOES 1-25) 25 81. OMNI incorporates Paragraphs | through 62, 64 through 71, 73 through 26 76 and 78 through 80 inclusive, as though fully set forth herein. 27 M11 Do" 28 COMFEAIN 82. OMNI is informed, believes and thereon alleges, that as a result of his wrongful acts and omissions, GROOMS has wrongfully acquired and/or detained certain existing property to which OMNI has a right, including but not limited to: (i) the amounts that GROOMS was overpaid out of the Affordable Care Act block payments in 2014 and (ii) the amounts that GROOMS owes for his shares of refunded laboratory fees. 83. OMNI is informed and believes, and thereon alleges, that GROOMS is not entitled to reap the benefits of the monies and it would be unjust and inequitable for GROOMS to retain them. OMNI is therefore entitled to restitution and/or disgorgement of said revenues, earnings, compensation, and other benefits in amounts according to proof at trial but 10 in an amount no less than $92,386.53. 11 84. To date, GROOMS has failed to return those funds held unjustly and 12 inequitably for OMNI further causing OMNI damages according to proof at trial. 13 FIFTH CAUSE OF ACTION 14 (Fraud and Deceit — Suppression and Concealment of Material Facts against GROOMS 15 and DOES 1-25) 16 85. OMNI incorporates Paragraphs 1 through 62, 64 through 71, 73 through 17 76, 78 through 80 and 82 through 84 inclusive, as though fully set forth herein. 18 86. As an OMNI Board Member and OMNI officer, GROOMS owed OMNI 19 a fiduciary duty. 20 87. Suppression or concealment of a material fact by a fiduciary such as 21 GROOMS constitutes actionable fraud. 22 88. At all relevant times mentioned herein, OMNI’s Board of Directors held 23 monthly meetings and GROOMS attended most every one of them. The topic of OMNI’s 24 finances was discussed by the Board of Directors at each of those meetings. 25 89. As alleged hereinabove, OMNI is informed, believes and thereon alleges 26 that GROOMS suppressed, concealed and failed to disclose to OMNI many material facts, 27 including but not limited to the following: DO 28 COMPLAINT a. Actively failing to disclose and keeping the fact of certain Shareholder Physicians’ negatively-operating cost centers hidden and secreted from the full OMNI Board of Directors and other of OMNI’s Shareholder Physicians; The fact that he intentionally secreted and purposefully kept hidden from the OMNI Board of Directors the fact that certain Shareholder Physicians had continually growing unpaid balances in their Shareholder Receivables Account that were due and owing to OMNI; and, 10 Obtaining a $150,000 advance on OMNI’s line of credit without 11 bringing the matter to OMNI’s Board of Directors for approval 12 and without notifying OMNI and the other Physician 13 Shareholders of the advance, thereby exposing OMNI to liability 14 for the $150,000 advance on OMNI’s line of credit under 15 circumstances where his breaches of fiduciary duty caused the 16 cash flow problem that he claimed gave rise to the need for the 17 advance. 18 90. The suppression and concealment of the aforementioned material facts, 19 which were known to GROOMS during the OMNI Board Meetings was likely to, and did in 20 fact mislead OMNI in the light of other representations GROOMS made concerning the 21 financial condition of OMNI. 22 91. The failures to disclose information and suppressions of information 23 herein alleged to have been made by GROOMS were made with the intent to hide and distract 24 OMNI from the true facts of GROOMS’ harmful conduct and induce OMNI to act in a manner 25 that would enable him to continue to take advantage of OMNI through his secret bad acts. 26 92. OMNI, at the time these failures to disclose and suppressions of facts 27 occurred, and at the time OMNI took the actions herein alleged, was ignorant of the existence 28 COMET AINT of the facts that GROOMS suppressed and failed to disclose. If OMNI would have been aware of the existence of the facts not disclosed by GROOMS, OMNI would not have, as it did, relied on the completeness and accuracy of the statements OMNI fiduciary GROOMS made during OMNI Board of Directors meetings and otherwise concerning the financial condition of OMNI. 93. As a proximate result of the fraudulent conduct of GROOMS as alleged hereinabove, OMNI was induced to, among other things, accept the financial information GROOMS furnished to OMNI’s Board of Directors as accurate and compl