Judge Cans North Carolina Captive’s Claims That Managers Stole Software

Six months after a North Carolina captive insurance firm for nursing homes around the country accused its managers of poaching proprietary software and forming a competing management company, a federal judge has dismissed the lawsuit.

“Plaintiffs have pleaded no factual enhancement to support their claim that any of the defendants are using the proprietary software,” U.S. District Judge Terrence Boyle wrote in his Oct. 23 decision. “The bare allegations of use simply fail to nudge the claim across the line from conceivable to plausible.”

The dispute began more than two years ago. Samuel Goldner’s Goldner Capital Management owns multiple senior housing and nursing facilities in the United States. Sherbrooke Corporate Ltd. was founded in 2018 as a captive insurance program for many of those facilities. Gabriel Mayer, Beau Walker and Joe Matthew Queen were named managers.

In 2022, Goldner and Sherbrooke charged that the managers had formed their own, competing management firm known as Helios Risk Solutions and were engaged in self-dealing. Sherbrooke’s complaint also claims that the three men illegally copied and utilized the software that Sherbrooke had spent more than $1 million to develop. The valuable software combed through medical records to predict risk for individual patients.

But the judge, in what could be seen as the main takeaway in the litigation, found that Sherbrooke did not show that the software was really considered to be a trade secret.

“First, the allegation that Sherbrooke has utilized ‘all commercially reasonable measures’ to keep the proprietary software secret is conclusory,” the judge wrote. “Second, the complaint does not actually allege that the proprietary software was treated as ‘confidential information’ under the employment agreement confidentiality provision or that none of the exceptions to what employees must maintain as confidential applied.”

Simply alleging that employees were subject to confidentiality provisions in an employment contract is not the same as plausibly alleging that any information or system was kept secret through commercially reasonable measures, Boyle noted.

Sherbrooke and Goldner also did not show that the managers misappropriated the software or that they were using it.

Sherbrooke may yet try to appeal the decision.