24 CSHM V Kuhn Response

IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

CSHM LLC, )
)
)
Plaintiff, )
)
v. ) Case No. 3:14-cv-01025
)
DR. J ODI KUHN, DDS, )
CHILDRENS DENTAL CLINIC OF THORNTON, P.C. )
(n/k/a THORNTON YOUTH DENTISTRY, PC), ) J udge Aleta A. Trauger
SMILE HIGH DENTISTRY FOR CHILDREN, P.C. )
(n/k/a DENVER YOUTH DENTISTRY, PC), )
6
TH
STREET OF DENVER DENTAL CLINIC, P.C. )
(n/k/a AURORA YOUTH DENTISTRY, PC), and )
SMALL SMILES DENTISTRY FOR CHILDREN, P.C. )
(n/k/a SPRINGS SMILES YOUTH DENTISTRY, PC), )
)
Defendants. )

DEFENDANTS RESPONSE IN OPPOSITION TO
PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION
Defendants Dr. J odi Kuhn, DDS (Dr. Kuhn), Thornton Youth Dentistry, PC (Thornton
Clinic), Denver Youth Dentistry, PC (Denver Clinic), Aurora Youth Dentistry, PC (Aurora
Clinic), and Springs Smiles Youth Dentistry, PC (Springs Clinic) (collectively Defendants)
hereby request that the Court enter an Order denying Plaintiff CSHMs unwarranted request for a
preliminary injunction. In support of their request, Defendants state as follows:
INTRODUCTION
By its request for preliminary injunction, CSHM improperly seeks to prevent Dr. Kuhn
from operating, without interference from CSHM, the four Colorado dental clinics CSHM admits
Dr. Kuhn owns. CSHM, which is being shut out of participation in all federal health care
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Case 3:14-cv-01025 Document 24 Filed 05/06/14 Page 1 of 25 PageID #: 255
programs and being forced by the federal government to shut down or divest its assets because of
its long-term misconduct and its repeated violations of its agreements with the government,
suggests the Court should grant an injunction to protect CSHMs reputation. Quite to the
contrary, granting an injunction and forcing the Defendant dental clinics to continue working
with CSHM would damage Defendants and their reputations. CSHMs request for an injunction:
is a misguided and improper attempt to intimidate and control Dr. Kuhn; is premised on serious
misstatements of fact; fails to inform the Court of important facts; and is not justified under the
law because CSHM cannot establish that any of the preliminary injunction factors favor issuing
an injunction. Moreover, CSHM comes to the Court with unclean hands, including because, in
obtaining a Temporary Restraining Order from the Court, CSHM suggested that it had provided
fair notice to Defendants when, in reality, CSHM only left a single voicemail less than an hour
before requesting relief from the Court. As set forth below, CSHMs Motion should be denied
for each and all of these reasons.
FACTUAL BACKGROUND
A. CSHM
CSHMs Motion is largely devoid of any information regarding CSHM. That omission is
telling.
As described in the J une 2013 J oint Staff Report on the Practice of Corporate Dentistry
In The Medicaid Program issued by the United States Senates Finance and J udiciary
Committees (hereafter Senate Report), which focuses directly on CSHM, CSHM is a dental
management company that works with dental offices across the country and ostensibly provides
general administrative management services. (See Senate Report (text attached as Ex. 1,
complete copy, with exhibits, available at http://www.finance.senate.gov/library/prints/).) In
2

truth, CSHMs work with dental clinics extends far beyond providing typical management
services.
CSHM attempts to assume effective control over the clinics with which it has
agreements, and those agreements provide CSHM with all or substantially all of each clinics
profits. (Id., pp. 2, 6, 8.) Thus, notwithstanding that the laws of 22 states (including Colorado)
and the District of Columbia prohibit the corporate practice of dentistry (id., p. 33; see also p.2
(defining corporate practice of dentistry as a corporation, rather than a licensed dentist, owning
and operating a dental practice)), CSHM attempts to assume effective ownership and
management over the clinics with which it works (id., p. 10 (quoting investment bank offering
memorandum utilized in 2007 transaction in which predecessor to CSHM was sold in private
equity transaction for hundreds of millions of dollars)).
Not only does CSHM improperly attempt to engage in the corporate practice of dentistry,
for years CSHM and its predecessors also have faced governmental claims of misconduct. For
instance, in 2010, after a lengthy investigation by the United States Department of J ustice (which
was involved because CSHMs business relates predominantly to dental services provided to
Medicaid patients), CSHMs predecessor attempted to resolve multiple issues it was facing
(including claims of improper Medicaid billing) by entering into: (1) a Corporate Integrity
Agreement (CIA) with the United States Department of Health and Human Services; and (2)
settlement agreements with the United States Department of J ustice and 22 states. (Ex. 1, p. 12.)
The CIA required the company to institute rigorous compliance procedures and programs, as
well as submit to regular audits and reviews by an Independent Monitor. (Id.)
Two years later, in 2012, the predecessor company, which had changed its name to
Church Street Health Management, LLC, declared bankruptcy. CSHM allegedly purchased
3

certain of the companys assets in a bankruptcy sale, but the problems did not abate; instead, they
became worse. The year after CSHM took over, the Office of the Inspector General (OIG) of
the United States Department of Health and Human Services notified CSHM of its material
breach of the CIA, and of the governments intent to exclude CSHM from participation in federal
health care programs. (Exclusion Agreement, attached as Ex. 2, p. 1, 3.) Then, on March 7,
2014, the OIG informed CSHM that it would be excluded from all federal health care programs.
(Id. at p. 1, 4.) Shortly thereafter, on April 1, 2014, CSHM entered into an Exclusion
Agreement with the OIG, which provides that: CSHM will be excluded from participation in all
federal health care programs, including Medicare and Medicaid, no later than September 30,
2014; and, CSHM must shut down its operations, or, alternatively, divest its assets and
operations to arms-length buyers, no later than September 30, 2014. (Id., generally.)
Faced with the Exclusion Agreement, CSHM now is scrambling to sell its assets, and is
improperly attempting to intimidate Dr. Kuhn in the hope that she will support that sale process.
B. CSHMs Purported Management Services Agreements With The Defendant
Colorado Clinics
CSHM suggests throughout its Motion that it is party to 2006 Management Services
Agreements with each of the four defendant dental practice entities. That suggestion is wrong.
As an initial matter, the Management Services Agreements submitted with CSHMs
Motion are not CSHM agreements, but, rather, are agreements with SANUS Holdings, LLC.
(See Exhibits A-D to Plaintiffs Memorandum Of Law In Support of Plaintiffs Motion
(Mem.)) CSHM asserts that the agreements were transferred to CSHM in a bankruptcy sale,
but CSHM fails to support that assertion with anything other than the conclusory Declaration of
its General Counsel. (Mem., p. 2.) Further, CSHM fails to acknowledge that the bankruptcy by
4

which CSHM claims to have acquired the agreements made the agreements freely terminable by
each respective practice. (Plaintiffs Exs. A-D, 8.02.(b) (specifying that agreement may be
terminated by the practice if the other party declares bankruptcy, is adjudicated bankrupt, or if a
bankruptcy trustee is appointed.) Still further, as addressed in Defendants argument below,
even if these issues did not exist, the purported agreements never could have come into existence
because, as three different United States District Court J udges in the District of Colorado have
determined, practice management agreements like the alleged agreements here violate
fundamental Colorado public policy and are void.
C. Dr. Kuhns Purchase of Her Dental Clinics, and Her Relationship With
CSHM
Dr. Kuhn purchased the four defendant dental practices from Dr. Randy Ellis on J anuary
1, 2013. (See Purchase Agreements, attached as Exs. 3-6.) Dr. Kuhn purchased the companies
free and clear of any and all liens, claims, pledges, charges, options, contractual restrictions and
encumbrances whatsoever. (Exs. 3-6, 1(a).) Dr. Kuhn did not, as CSHM contends, purchase
the companies in exchange for agreeing to perpetual Management Services Agreements
(MSAs) for each center with CSHM. (Mem., p. 1.)
The only documents Dr. Kuhn entered into with CSHM in connection with the J anuary 1,
2013 purchase transactions were Stock Pledge Agreements relating to each clinic. (Exs. 7-10.)
Importantly, CSHM does not rely on or reference those Stock Pledge Agreements in its Motion.
Moreover, to the extent CSHM nonetheless attempts to rely on those Stock Pledge Agreements,
they reference Management Services Agreements different from the Agreements CSHM relies
upon, and, accordingly, are not relevant to CSHMs arguments. (Compare Exs. 7-10 at p. 1
(referencing purported J uly 2007 Agreements) with Plaintiffs Mem. Exs. A-D (all dated
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September 26, 2006).) Additionally, any guarantee of payment of Management Services
Agreement obligations set forth in any of the Stock Pledge Agreements is nonexistent because:
(a) the Stock Pledge Agreements are explicit that they exist only if the Management Services
Agreement each references is in effect (Exs. 7-10 at p. 4); (b) none of the purported Management
Services Agreements referenced in the Stock Pledge Agreements is in effect; and, (c) as set forth
in Defendants argument below, the purported Management Services Agreements CSHM relies
upon are void and unenforceable.
D. Dr. Kuhns Notice To CSHM That The Purported Management Services
Agreements Are Void, And CSHMs Improper Conduct In Response
When Dr. Kuhn was informed that CSHM had been excluded from all federal health care
programs and would cease operation within months, she, understandably, wanted to cut ties with
CSHM. In the process of reviewing her options, Dr. Kuhn learned of the Mason case (discussed
in Defendants argument below), which established that dental management arrangements like
those CSHM seeks to have with its affiliated dental clinics are impermissible and void under
Colorado law. Mason v. Orthodontic Centers of Colorado, Inc., 516 F.Supp.2d 1205 (D. Colo.
2007). In light of and based on her knowledge, Dr. Kuhn, through her counsel, notified CSHM
in writing on April 15, 2014, that the Management Services Agreements CSHM claims it has
with each of Dr. Kuhns clinics are void and of no effect. (See Notice Letters attached as Exs.
11-14.) Dr. Kuhns letters stated, in part, that each purported Management Services Agreement
was:
void and unenforceable under Colorado law as its terms and conditions are
prohibited under the Dental Practice Law of Colorado, C.R.S. 12-35-101 et.seq.
The U.S. District Court for the District of Colorado, in Mason v. Orthodontic
Centers of Colorado, Inc., 516 F.Supp.2d 1205 (D. Colo. 2007), has previously
interpreted the enforceability of an agreement for the provision of business and
6

administrative services to a dental practice in light of Colorados public policy
against the unauthorized practice of dentistry, as codified in the Dental Practice
Law of Colorado. The Court in Mason found that the provisions of a business and
administrative services agreement were void because they (i) caused the corporate
provider of management services to be engaged in the practice of dentistry as a
proprietor of the dental practice, and (ii) constituted an impermissible sharing of
professional fees. The services agreement in the Mason case was materially
similar to the Management Services Agreement.
(Exs. 11-14, p.1.)
After receiving Dr. Kuhns April 15, 2014 notice letters, CSHM engaged in limited
communication with Dr. Kuhns counsel for five days (two of which were weekend days, and
one of which was Easter Sunday). Notwithstanding that CSHM had not mentioned at any point
during those communications any intent to seek a temporary restraining order, CSHM sought
such an Order from this Court on Monday, April 21, 2014. CSHMs only advance notice to
Defendants was a voice mail message CSHMs counsel left for Defendants counsel less than an
hour before making its request, and which Defendants counsel did not receive until after CSHM
obtained its temporary restraining order. CSHM, accordingly, was able to obtain its temporary
restraining order without the Court having the opportunity to hear from any Defendant.
E. CSHMs Vague, Inadmissible, And Incorrect Assertions Regarding Dr.
Kuhns Purported Conduct
CSHM attempts to color the so-called Statement of Facts in its Motion with various
claims that disparage Dr. Kuhn. For instance, CSHM claims that Dr. Kuhn decided to launch a
hostile takeover, and that Dr. Kuhn referred to her actions as such. (Mem., p. 6.) Similarly,
CSHM claims that Dr. Kuhn was diverting funds to secretly created accounts. (Id.) Still
further, CSHM claims that Dr. Kuhn engaged in unethical and improper conduct that shocked
many of her staff members. (Id. at p. 2.) Even more egregiously, CSHM attempts to smear Dr.
7

Kuhn by suggesting that Dr. Kuhn has been the subject of a number of quality of care
complaints over the past few years, and that refraining from enjoining her could pose threats to
patients being treated in her centers. (Id.)
CSHMs claims are not true. For instance, contrary to CSHMs assertions that Dr. Kuhn
engaged in any unethical conduct constituting a hostile takeover, Dr. Kuhn engaged only in
limited actions, consistent with a letter she sent CSHM on April 18, 2014, in which she informed
CSHM that she would be transitioning her clinic operations away from any involvement with
CSHM no later than April 30, 2014. (April 18, 2014 letter from Fellows to Wilson, attached as
Ex. 15.) There was nothing secret or unethical about her actions, and Dr. Kuhn did not refer to
her actions as part of a hostile takeover (including because any such reference would be
nonsensical in light of Dr. Kuhns existing sole ownership of the Defendant clinics). (Affidavit
of Dr. J odi Kuhn (Kuhn Aff.), attached as Ex. 16.) Similarly, Dr. Kuhn has not been the target
of quality of care complaints over the last few years, and provides outstanding care to her
patients. (Id.)
Critically, CSHMs only support for its assertions is the Declaration of its General
Counsel, Reginald Gibson, J r., which is unhelpful, suspect, and inadmissible for a number of
reasons. For example, with regard to the quality of care attack, Mr. Gibsons Declaration does
not even support CSHMs assertions. Mr. Gibson states only that the Center in Denver has
been the subject of a number of quality of care complaints in recent years. (Declaration of
Reginald S. Gibson, Kr. (Gibson Decl.), 10.) Mr. Gibson does not specifically identify any
such complaints, does not tie the allegation to the time period Dr. Kuhn has owned the Defendant
clinics, and CSHM has refused to identify the basis for its assertion despite repeated written
8

requests from counsel for Defendants. (See April 29, 2014 e-mail from Baker to Barnowski,
attached as Ex. 17.)
Similarly, with regard to the other allegations identified above, Mr. Gibsons Declaration
is predicated on, at best, inadmissible hearsay. Mr. Gibson asserts that CSHM (apparently rather
than Mr. Gibson himself) was contacted by some undisclosed employee of Kuhns (as opposed
to an employee of any of the Defendant clinics) who allegedly reported that Dr. Kuhn made
certain requests of unnamed employees to obtain and provide information. (Gibson Decl., p. 4,
13.) Yet, the requests Dr. Kuhn allegedly made are not nefarious. Rather, they are consistent
with the transition she disclosed to CSHM in writing; and, in any event, Mr. Gibsons purported
testimony appears to lack foundation and is inadmissible hearsay. See Fed. R. Evid. 801(c) and
802.
CSHMs allegations of misconduct on Defendants part, thus, are false. Moreover, it
appears CSHM is making its allegations to divert the Courts attention from the indisputable fact,
not addressed in CSHMs Motion, that CSHM has been found to have repeatedly violated federal
health care program requirements, and, accordingly, will be excluded from participation in any
federal health care program no later than September 30, 2014.
ARGUMENT
I. CSHM IS NOT ENTITLED TO PRELIMINARY INJUNCTIVE RELIEF, AND
THE INJUNCTION IT SEEKS WOULD IMPROPERLY INTERFERE WITH DR.
KUHNS RIGHT TO PRACTICE DENTISTRY FREE FROM INTERFERENCE
FROM CSHM
An injunction is a drastic and extraordinary remedy, which should not be granted as a
matter of course. Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 130 S.Ct. 2743, 2761
9

(2010) (citation omitted); Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir. 2000). In deciding
whether to grant a preliminary injunction, a court must consider four factors:
1) Whether the plaintiffs have shown a strong or substantial likelihood or
probability of success on the merits;
2) Whether the plaintiffs have shown irreparable injury;
3) Whether the issuance of a preliminary injunction would cause substantial harm
to others; [and]
4) Whether the public interest would be served by issuing a preliminary
injunction.
Mason Cnty. Med. Ass'n v. Knebel, 563 F.2d 256, 261 (6th Cir. 1977). A plaintiff cannot obtain
a preliminary injunction based on allegations. To the contrary, the evidence and proof required
for a plaintiff to establish a right to a preliminary injunction is much more stringent than the
proof required to survive a summary judgment motion. Leary, 228 F.3d at 739. Moreover,
[t]he concept of unclean hands may be employed by a court to deny injunctive relief where the
party applying for such relief is guilty of conduct involving fraud, deceit, unconscionability, or
bad faith related to the matter at issue to the detriment of the other party. Performance
Unlimited, Inc. v. Questar Publishers, Inc., 52 F.3d 1373, 1383 (6th Cir. 1995) (quoting Novus
Franchising, Inc. v. Taylor, 795 F.Supp. 122, 126 (M.D. Pa.1992).)
Here, CSHM is not entitled to injunctive relief because it has not established, and cannot
establish, that consideration of the four factors favor issuing a preliminary junction, and, in any
event, CSHM is not entitled to an injunction because of its unclean hands.
A. CSHM Has Not Established A Strong Or Substantial Likelihood Or
Probability Of Success On The Merits
CSHM argues that it will succeed on the merits because, it claims, the parties entered
into valid agreements, which are not contrary to public policy, and Kuhn and the Centers are
10

clearly violating them in an egregious manner. (Mem., pp. 8-9.) None of these claims is true,
and CSHM is unlikely to succeed on its purported breach of contract claim.
1. The Contracts CSHM Claims Exist Are Void Because They Violate
Fundamental Public Policy
To begin with, the purported contracts CSHM seeks to enforcethe Management
Services Agreementsare not enforceable against Defendants because they are void as a matter
of law.
As noted above, the Senate Report confirms that: CSHM attempts to assume effective
control over the clinics with which it has agreements; CSHMs agreements purport to entitle
CSHM to all or substantially all of each clinics profits; and, CSHM attempts to assume effective
ownership and management over the clinics with which it works. (Ex. 1, pp. 2, 6, 8, 10.
1
) With
regard to payment terms, the purported Management Services Agreements CSHM relies on in
this matter are clear that CSHM seeks to take all income above expenses generated by each
Defendant clinic (i.e. all profit). (See Plaintiffs Mem. Exs. A-D, 3.09.) As confirmed by three
different United States District Court J udges in the District of Colorado who analyzed similar
contracts in 2007, this fact, along with other provisions of the Management Services
Agreements, renders the purported agreements void because they violate fundamental Colorado
public policy as reflected in the Dental Practice Law of Colorado, C.R.S. 12-35-101 et.seq.
(which precludes Corporate Dentistry in Colorado). See Mason v. Orthodontic Centers of
1
CSHM has asserted that the Senate Report is inadmissible, but that assertion is wrong. See Fed.
R. Evid. 803(8)(C) (providing for admission of public reports made pursuant to authority
granted by law, unless the sources of information or other circumstances indicate lack of
trustworthiness.); Ponce v. Constr. Laborers Pension Trust for S. California, 774 F.2d 1401,
1403 (9th Cir. 1985) (affirming admission of Senate report); Barry v. Trustees of Int'l Ass'n Full-
Time Salaried Officers & Employees of Outside Local Unions & Dist. Counsel's (Iron Workers)
Pension Plan, 467 F. Supp. 2d 91, 101 (D.D.C. 2006) (concluding Senate report admissible).
11

Colorado, Inc., 516 F.Supp.2d 1205 (D. Colo. 2007) (attached as Ex. 18), Gentile v Orthodontic
Centers of North Dakota, Inc., Civil Action No. 05cv02062EWNCBS, 2007 WL 2890199
(D. Colo. Sept. 27, 2007) (attached as Ex. 19), and Weinbach v. Orthodontic Centers of
Colorado, Inc., Civil Action No. 06-CV-00256 REB-MEH, 2007 WL 2786426 (D. Colo. Sept.
24, 2007) (attached as Ex. 20).
Mason is instructive. The agreement at issue in that case was an agreement for dental
office management services, which included provisions permitting the management company to
collect essentially 40% of the dental offices profits. 516 F.Supp.2d at 1208-1209. In light of
that provision, which caused the management company to impermissibly share in fees, and the
management companys impermissible action as a proprietor within the meaning of the Dental
Practice Law, the court found the contract void. Id. at 1210-1217. The basis for the courts
conclusion was clear:
the public interest prohibiting fee splitting, as expressed in C.R.S. 12-35-
129(1)(v), outweighs any private interests the Defendants might have in enforcing
the payment term of the Agreement. The public interest is a strong one, and the
conduct contemplated by the Agreement directly contravenes the purposes that
the public policy advances. Although voiding the contract works some degree of
inequity upon the Defendants, they are not unreasonably prejudiced . . . .
Id. at 1216-1217. In addition, the court emphasized that [w]hether the parties entered into the
contract in good faith, and whether they performed the contract according to its terms are
irrelevant to the [voidness] inquiry because the voidness doctrine exists not to protect the party
seeking to avoid its obligations under the agreement, but rather, for the protection of the public at
large. Id. at 1212 (citation omitted); see also id. at 1214 (in its analysis, the Court pays little
concern to the contracting parties at all; the Court is exclusively concerned with whether
12

nullification of the contract is necessary to protect the public). Mason establishes that the
Management Services Agreements CSHM seeks to enforce are void.
CSHM attempts to distinguish Mason by asserting that CSHM has never attempted to
collect from any of the Defendant clinics more than the $175,000 per month component of the
fee prescribed in Section 3.09 of the Management Services Agreements. (Mem., p. 10.) That
argument, however, completely misses the point that CSHM seeks to enforce purported contracts
which are constructed to insure CSHM takes not just 40% of profits as in Mason, but all of each
Defendant clinics profits. (See Plaintiffs Mem. Exs. A-D, 3.09; see also 3.07 (providing for
all funds received by each practice to be deposited in accounts controlled by CSHM).) Thus, as
in Mason, CSHM seeks impermissibly to share (actually to take all) dental practice fees. 516
F.Supp.2d at 1210-1211 (citing C.R.S. 12-35-129(1)(v)).
CSHM also attempts to distinguish Mason by asserting that CSHMs purported contracts
do not, as in Mason, specify that the management company owns dental equipment and leases in
its own name the dental office space. (Mem., pp. 10-11.) Again, however, CSHMs arguments
miss the mark. As noted above, CSHM attempts to assume effective ownership and management
over the clinics with which it works (see Ex.1, p. 10), and, accordingly, is a proprietor within
the meaning of the Dental Practice Law, whose purported contract is void for this reason as well.
Mason, 516 F.Supp.2d at 1217-1219 (citing C.R.S. 12-35-103(14) (defining proprietor to
include one who controls a dental office)).
Finally, CSHM attempts to distinguish Mason by emphasizing that, after finding the
provisions of the agreement at issue void, the District Court did not enter a judgment invalidating
the agreement. (Mem., p. 11.) Yet, as is self-evident from the Mason opinion, that argument is
misplaced. The Mason court limited its resolution because the issues were presented based on a
13

narrow relief from automatic stay order the plaintiffs had obtained from the Bankruptcy Court
handling the defendants bankruptcy, which permitted the Court to address only the narrow
question presented. Mason, 516 F.Supp.2d at 1208, 1219. In short, the court was not being
asked to fashion a remedy. Id. at 1219. Moreover, Gentile forecloses CSHMs argument
because there, based on similar facts, the court determined that the agreement at issue was, in
total, illegal and void as against public policy. 2007 WL 2890199, *13. Even further, and
directly contrary to CSHMs argument that the void provisions of the purported agreement are
severable, the Gentile court determined the case was most unlike cases where an unenforceable
clause is read out of an otherwise valid contract and determined that severance of the fee-
sharing provisions from the [agreement] would, in effect, eviscerate the core bargain between
Plaintiffs and Defendants. Id.
In short, despite CSHMs protest, the purported Management Services Agreements that
form the basis for CSHMs purported breach of contract claim are void and cannot be saved by
severing limited portions of the payment provisions.
a. CSHMs Argument That Tennessee Law Governs The Voidness Inquiry
Is Misdirected And Wrong
Relying on a choice of law provision in the purported Management Services Agreements,
CSHM argues repeatedly that Tennessee law governs the analysis of whether those agreements
are void. (Mem., pp. 9, 12, 13.) CSHMs argument and conclusion are wrong.
First, because the purported Management Services Agreements are void ab initio and
never come into effect, there is no basis for grounding choice of law on a provision in those
purported agreements. Second, as explained by the Mason court:
the choice of law provision of the contract is immaterial. . . . The question
presented here is whether one or more of those unambiguous terms are contrary to
14

the public policies of the State of Colorado . . . . There can be no colorable
argument that the determination of Colorados public policies must be made in
light of [another states] law, and thus, the Court rejects any argument by the
Defendants that the choice of law provision in the Agreement is relevant here.
516 F.Supp.2d at 1210. This conclusion was confirmed in Gentile, where the court stated:
It is also beyond dispute that Colorados[Dental Practice Law] governs the
conduct of both: (1) Plaintiffs, in the practice of dentistry in the state; and
(2) Defendants, by setting limits as to what they can and cannot do in relation to
Plaintiffs Colorado practice.
2007 WL 2890199, *12.
Second, this conclusion is confirmed by the purported Management Services Agreements
themselves, which state that all management services will be provided [s]ubject to applicable
law, and that CSHM will comply with all applicable rules [and] regulations . . . of any
governmental body or authority in the performance or carrying out of its obligations . . . .
(Plaintiffs Mem. Exs. A-D, p. 2 and p. 15 ( 9.11).)
Third, even if the Court were to analyze the purported choice of law provision, Colorado
law would nonetheless apply. A federal court exercising diversity jurisdiction applies the choice-
of-law rules of the state in which it is located. See Klaxon Co. v. Stentor Elec. Mfg., 313 U.S.
487, 496 (1941). Tennessee follows the Restatement approach with regard to analysis of
contractual choice of law provisions, and will not enforce a contractual choice of law where the
chosen law is contrary to a fundamental policy of a state having a materially greater interest and
whose law would otherwise govern. Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 650 (Tenn.
Ct. App. 1999) (citing Goodwin Bros. Leasing, Inc. v. H & B Inc., 597 S.W.2d 303, 306
(Tenn.1980) (quoting Restatement (Second) of Conflict of Laws 187(2) (1971))).
15

Here, as reflected by Mason, Gentile, Weinbach and the Dental Practice Law of
Colorado, Colorado has a fundamental public policy against agreements such as the purported
Management Services Agreements, which attempt to effectuate the corporate practice of
dentistry. Moreover, Colorados interest in the practice of dentistry in Colorado is materially
greater than Tennessees basic interest in standard contract evaluation, and Colorado law would
govern absent any contractual choice of law. Finally, under both Colorado and Tennessee law, it
is impermissible for parties to privately contract in contravention of public policy, and such
contracts will not be enforced. See, e.g. Peterman v. State Farm Mut. Auto. Ins. Co., 961 P.2d
487, 492 (Colo. 1998) (citing University of Denver v. Industrial Comm'n, 138 Colo. 505, 335
P.2d 292 (1959)); Blackburn & McCune, PLLC v. Pre-Paid Legal Servs., Inc., 398 S.W.3d 630,
651 (Tenn. Ct. App. 2010) (citing cases).
Stated simply, CSHMs argument that Tennessee law governs is wrong for multiple,
independent reasons, and Colorado law actually governs. Yet, application of Tennessee law
would not change the ultimate outcome because Tennessee will declare void and not enforce
contracts that harm the public good (Blackburn & McCune, 398 S.W.3d at 651), and, as set forth
in the Senate Report, and confirmed by the Exclusion Agreement, CSHMs contracts do, in fact,
harm the public good.
2. CSHM Has Not Established Even A Facially Valid And Enforceable
Contract
Even if the purported contracts were not void, CSHM has not established, as it must to
succeed on its purported breach of contract claim, that the parties entered into a facially valid
contract. As noted above, the Management Services Agreements CSHM claims support its
breach of contract claim against Defendants are not CSHM agreements, but, rather, are
16

agreements with SANUS. (See Plaintiffs Mem. Exs. A-D.) CSHM claims the agreements were
transferred to it in a bankruptcy sale, but fails to support that bald assertion. CSHM attempts to
support the assertion with the conclusory statement of its General Counsel (Mem., p. 2; Gibson
Decl., 3), but that conclusory statement, which constitutes a legal opinion, is inadmissible.
Woods v. Lecureux, 110 F.3d 1215, 1220 (6th Cir. 1997) (testimony offering nothing more than a
legal conclusion is inadmissible); State Mut. Life Assur. Co. of Am. v. Deer Creek Park, 612 F.2d
259, 264 (6th Cir. 1979) (Federal Rules of Civil Procedure requires that affidavits be made on
personal knowledge, setting forth such facts as would be admissible in evidence. Affidavits
composed of hearsay and opinion evidence do not satisfy Rule 56(e) and must be disregarded.)
Moreover, the text of the purported Management Services Agreements CSHM relies on
establishes that they were not freely assignable (Exs. 3-6 at 9.06), and that the bankruptcy by
which CSHM claims to have acquired the agreements made the agreements freely terminable by
the party to be bound (Exs. 3-6 at 8.02.(b)). In short, CSHM has not established that it has a
contract to enforce.
Similarly, and equally fatal, CSHM has not established that the purported Management
Services Agreements are enforceable against Defendants. First, CSHM does not even contend
that it has a Management Services Agreement with Dr. Kuhn, individually. Thus, even under the
allegations of CSHMs Complaint, there is no basis for a breach of contract claim against her. In
addition, as noted above, Dr. Kuhn purchased the four Defendant dental practices from Dr. Ellis
free and clear of any and all liens, claims, pledges, charges, options, contractual restrictions and
encumbrances whatsoever. (See Purchase Agreements, Exs. 3-6, 1(a).) Dr. Kuhn,
accordingly, did not, as CSHM contends, purchase the companies in exchange for agreeing to
perpetual Management Services Agreements with CSHM. (Mem., p. 1.)
17

3. The Purported Contracts Also Are Unenforceable Because They Have Been
Terminated
CSHM also fails to recognize that, even if the purported Management Services
Agreements were not void, they have been terminated. As noted above, the bankruptcy by which
CSHM claims to have acquired the agreements made the agreements freely terminable by each
respective practice. Specifically, under Section 8.02 of the Management Services Agreements
upon which CSHM predicates its claim, either party has an explicit right to terminate if the other
party files for bankruptcy, is adjudicated bankrupt, or if a bankruptcy trustee is appointed.
(Plaintiffs Mem. Exs. A-D, 8.02(b).) Here, CSHMs predecessor was adjudicated bankrupt
and a bankruptcy trustee was appointed, so, even if the Management Services Agreements
existed and were binding, each Defendant dental practice had an unlimited right to terminate.
Moreover, in their April 15, 2014 notices, Defendants informed CSHM that each purported
Management Services Agreements were immediately voided, terminated, and of no further
force and effect. (Exs. 11-14, p. 1.) Accordingly, even if the agreements had been enforceable
before April 15, 2014, they were terminated at that time and are no longer of any force or effect.
B. CSHM Has Not Established That It Will Suffer Irreparable Harm Absent
The Injunction It Requests
CSHMs request for preliminary injunction also should be denied because CSHM cannot
establish that it will suffer irreparable injury without the injunction. Even if CSHM were able to
show a likelihood of success on the merits, which it cannot, that showing would be insufficient to
warrant a preliminary injunction because a plaintiff must also make a clear showing that it is at
risk of irreparable harm, which entails showing a likelihood of substantial and immediate
irreparable injury. Malibu Boats, LLC v. Nautique Boat Co., Inc., 3:13-CV-656-TAV-HBG,
2014 WL 417886, *16 (E.D. Tenn. Feb. 4, 2014) (citation and quotation omitted). CSHM relies
18

on Malibu Boats to acknowledge its obligation to show a likelihood of substantial and immediate
irreparable injury (Mem., p. 13), but does not acknowledge the courts additional statements that:
(1) the showing of irreparable harm must be clear; (2) harm generally is not irreparable if it can
be compensated by money damages; and, (3) the possibility of adequate compensatory relief at a
later date, in the course of resolving the dispute, weighs heavily against a claim of irreparable
harm. Malibu Boats, 2014 WL 417886, *16. Under these applicable standards, CSHM has not
demonstrated and cannot demonstrate irreparable harm.
CSHM claims irreparable harm based on: (1) obligations it contends it has under the
Corporate Integrity Agreement; (2) unspecified adverse impacts CSHM claims Dr. Kuhns
separation from CSHM will have on CSHMs efforts to sell; and (3) unspecified adverse impacts
CSHM claims Dr. Kuhns complete separation from CSHM will have on the purported good
will between CSHM and the federal government, as well as CSHMs reputation. (Mem., p. 15.)
Each of CSHMs contentions is meritless.
First, CSHMs arguments based on the Corporate Integrity Agreement are specious. For
example, because the Management Services Agreements CSHM claims it has with the Defendant
clinics are void, unenforceable and terminated, CSHM simply does not have reporting
obligations pursuant to the CIA with regard to the Defendant clinics. CSHM admits as much
when it acknowledges that the CIA obligations apply only to dental centers that [CSHM]
manages. (Mem., p. 2.) Additionally, CSHM offers and has no support for its suggestion that
Dr. Kuhn as a practical matter is preventing CSHM from meeting any obligations. (Mem., p.
14.) In reality, CSHM has not asked for any information that Dr. Kuhn has refused to provide.
Further, in light of the Exclusion Agreement removing CSHM from all federal health care
19

programs, it appears CSHM may not even have CIA reporting obligations. (See Exclusion
Agreement, Ex. 2, generally (not referencing continuing obligations under the CIA).)
Second, CSHMs arguments based on its effort to sell are equally unavailing. CSHM
offers no admissible evidence supporting its conclusory allegation that Defendants effort to
sever all relationships with CSHM will harm the sale process. Instead, CSHM relies solely on
conclusory and inadmissible allegations in the Declaration of its General Counsel. (Mem., pp.
14-15.) Moreover, impacts on sale price (if any) would be compensable via money damages (if
there were a basis for recovery), and cannot amount to irreparable harm. Still further, CSHMs
assertions miss the mark for the additional reason that, to the extent Dr. Kuhns April 15, 2014
notices adversely affect CSHMs efforts to sell, there will be no final judgment resolving
CSHMs purported breach of contract claim before the September 30, 2014 sale deadline set
forth in the Exclusion Agreement (CSHM has not even initiated the arbitration CSHM itself
claims will be required to resolve the issue), and certainly not well before that deadline (as would
be required to obviate any impact in the sales process). Thus, an injunction would not even
obviate the purported harm CSHM asserts, and CSHMs assertion that [n]o arbitral award
[could] remedy the situation (Mem., p. 15) is hollow rhetoric.
Third, CSHMs argument suggesting unspecified damage to its reputation and to the
purported goodwill between CSHM and the federal government is tellingly false. Simply put,
CSHMs reputation already is very negative, there is no goodwill between CSHM and the federal
government, and CSHM offers no evidence of any. In reality, as set forth in the Factual
Background above, CSHM has repeatedly violated federal requirements, as well as its
commitment to adhere to such requirements, and has now been excluded from all federal health
care programs because of its misconduct. (Exclusion Agreement, Ex. 2.) Additionally, CSHM
20

ties its argument concerning goodwill to a suggestion that Defendants conduct could cause
CSHM to fail to comply with the Exclusion Agreement (Mem., p. 15), but CSHM provides no
basis for the suggestion and there is none. Furthermore, even if there were goodwill that could
be damaged (which there is not), any damage at this point would be meaningless because, based
on the Exclusion Agreement, CSHM has been excluded from working with the federal
government for five years. (See Ex. 2.)
2

CSHM simply has not demonstrated and cannot clearly demonstrate, as it must, that it
will suffer substantial and immediate irreparable injury if the injunction it requests is not issued.
Accordingly, CSHMs request for injunction should be denied.
C. Granting The Injunction CSHM Is Requesting Would Cause Substantial
Harm To Defendants And Others
CSHMs request for injunction also fails because issuing the injunction would cause
substantial harm to Defendants and others. As just one example, CSHM seeks to continue taking
for its own benefit, rather than providing to Defendants, all of the profits of the Defendant dental
practices, which often are more than $100,000 per month in total. CSHM may argue that such
harm could be later remedied by money damages, but the reality is that CSHM likely will be
bankrupt as of September 30, 2014, the date by which it must remove itself from all federal care
programs and have shut down or divested its assets. (See Ex. 2.) Accordingly, Defendants will
2
CSHM also throws into its irreparable injury argument the suggestion from Performance
Unlimited, Inc. v. Questar Publishers, Inc., 52 F.3d 1373 (6th Cir. 1995), that injunctions
pending arbitration are appropriate if all preliminary injunction requirements are satisfied, and if
an arbitration award could not return the parties to the status quo ante. (Mem., p. 15.) Critically,
however, CSHMs suggestion that an arbitral award here could not return the parties to the status
quo ante is meritless. First, the status quo that existed prior to CSHMs request for injunction is
that the purported Management Services Agreements are void and/or terminated, and CSHM has
been so notified. Second, CSHM offers and has no support for the conclusory assertion on
which its arbitration argument is based, which is that Defendants conduct will cause CSHM to
violate the CIA and the Exclusion Agreement. (Mem., p. 15.)
21

be damaged. Moreover, contrary to CSHMs argument, for the reasons set forth in the Mason,
Gentile, and Weinbach cases, permitting CSHM continue attempting to engage in the
impermissible corporate practice of dentistry in Colorado hurts Colorado citizens. Additionally,
CSHMs no harm argument is meritless. CSHM has no support for the idea that its
involvement in the Defendant dental clinics improves care, and, in truth, as reflected in the
Senate Report (Ex. 1), CSHMs involvement in dental clinics is what sometimes leads to care
problems. Finally, forcing Defendants to continue being associated with CSHM will,
particularly in light of CSHMs exclusion, damage Defendants reputations and goodwill.
D. Granting The Injunction CSHM Requests Would Harm The Public Interest
CSHMs injunction request also fails because granting the requested injunction would
harm the public interest. As an initial matter, CSHM does not, as it claims, have any interest in
enforcing a purported contract, which, as set forth above, actually is void and unenforceable.
Additionally, contrary to CSHMs entire argument (Mem., p. 17), as also set forth above,
denying CSHMs request for injunction will not reduce the quality or quantity of patient care
Defendants provide, and will not interfere with CSHMs obligations. Finally, as set forth at
length the in the Mason, Gentile, and Weinbach cases, requiring Defendants to continue to do
business with CSHM permits CSHM to continue attempting to engage in the impermissible
corporate practice of dentistry in Colorado, which hurts the public, and is improper and against
fundamental Colorado public policy. Accordingly, granting the requested injunction would harm
the public interest.

22

E. Even If CSHM Were Otherwise Entitled To An Injunction (Which It Is Not),
The Court Should Not Grant Any Injunction Because CSHM Comes To The
Court With Unclean Hands
Although CSHMs request for injunction fails under each of the four injunctive relief
factors, and certainly fails when all of those factors are considered together, even if that were not
the case, issuing the injunction CSHM requests would be improper for the additional,
independent reason that CSHM requests the injunction with unclean hands. Sixth Circuit law is
clear that [t]he concept of unclean hands may be employed by a court to deny injunctive relief
where the party applying for such relief is guilty of conduct involving fraud, deceit,
unconscionability, or bad faith related to the matter at issue to the detriment of the other party.
Performance Unlimited, Inc. v. Questar Publishers, Inc., 52 F.3d 1373, 1383 (6th Cir. 1995)
(quoting Novus Franchising, Inc. v. Taylor, 795 F.Supp. 122, 126 (M.D. Pa.1992).) Here,
CSHM has engaged in both bad faith and unconscionable conduct. First, as it tacitly admits by
accepting a five year exclusion from Medicare and Medicaid, CSHM has an established history
of violating federal law. These misdeeds potentially threaten the good standing of all dental
practices that continue to be associated with CSHM.
Additionally, as described in the Factual Background above, CSHM never disclosed its
intention to seek a temporary restraining order before placing a single call to Colorado on its way
to the Court. This, of course, prevented Defendants from contesting in any way, much less
reasonably contesting, CSHMs request. Finally, CSHMs attempt to violate Colorado law and
take all profits of all of the Defendant dental practices is unconscionable. See Haun v. King, 690
S.W.2d 869, 872 (Tenn. Ct. App.1984) (unconscionability is present where contract terms are so
oppressive that no reasonable person would make or accept them); Davis v. M.L.G. Corp., 712
23

P.2d 985, 991 (Colo. 1986) (unconscionability is present where contract terms unreasonably
favorable one party).
CONCLUSION
CSHM is seeking an injunction to improperly prevent Defendant Dr. J odi Kuhn from
operating, without interference from CSHM, the four Defendant Colorado dental clinics CSHM
admits Dr. Kuhn owns. CSHMs request for injunction, however, is not justified under the facts
or the law. CSHM cannot establish a likelihood of success on its claims for reasons including
that the purported contracts it seeks to enforce are unenforceable and void. Moreover, CSHM has
not established and cannot establish any of the other preliminary injunction factors. CSHM will
not suffer irreparable harm absent the injunction, granting the injunction will cause substantial
harm to Defendants and others, and granting the injunction would disserve the public interest.
Finally, CSHMs request for injunction also fails because of CSHMs unclean hands.

WHEREFORE, for all of the foregoing reasons, Defendants request that the Court enter
an Order denying CSHMs Motion requesting that the Court issue a preliminary injunction
prohibiting Defendants from continuing efforts they have undertaken to separate from CSHM.

24

Respectfully submitted,

s/Gregory S. Reynolds
Gregory S. Reynolds (BPR#18204)
Riley Warnock & J acobson, PLC
1906 West End Avenue
Nashville, TN 37203
(615) 320-3700 Telephone
(615) 320-3737 Facsimile
greynolds@rwjplc.com

Sean D. Baker (pro hac vice pending)
CRUX LEGAL LLC
1899 Wynkoop Street, Suite 225
Denver, Colorado 80202
(720) 508-8713 Telephone
baker@cruxlegal.com

Attorneys for Defendants

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document was served via the
Courts ECF Electronic Filing System upon the following:

Peter C. Sales
Bradely Arant Boult Cummings LLP
1600 Division Street, Suite 700
Nashville, TN 37203
psales@babc.com

Dan Barnowski
David I. Ackerman
Dentons US LLP
1301 K. Street, NW, Suite 600
Washington, D.C. 20005
dan.barnowski@dentons.com
david.ackerman@dentons.com

on this 6
th
day of May, 2014.
s/Gregory S. Reynolds
25


24 CSHM V Kuhn Response

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24 CSHM V Kuhn Response

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IN THE UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF TENNESSEE

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