Item 3. Legal Proceedings
Item
3. Legal Proceedings
On
May 30, 2018, the Superior Court of New Jersey, Chancery Division, Somerset County (the “Chancery Court”) denied the Company’s
and MTBC Acquisition Corp.’s (“MAC”) request to enjoin an arbitration proceeding demanded by Randolph Pain Relief and
Wellness Center (“RPRWC”) related to RCM services provided by parties unaffiliated with the Company and MAC. On June 15,
2018, the Company and MAC filed an appeal of the Chancery Court’s decision with the New Jersey Superior Court, Appellate Division.
On July 19, 2018, the Chancery Court ordered that the arbitration be stayed pending the Company’s and MAC’s appeal. On appeal,
the Company and MAC contended they were never party to the billing services agreement giving rise to the arbitration claim, did not assume
the obligations of Millennium Practice Management Associates, Inc. (“MPMA”) under such agreement, and any agreement to arbitrate
disputes arising under such agreement did not apply to the Company or MAC as RPRWC terminated the agreement before the APA took effect.
On January 30, 2019, the parties conducted oral arguments before the Appellate Court.
On
April 23, 2019, the Appellate Division affirmed in part and reversed in part the trial court’s order. The Appellate Division upheld
the portion of the trial court’s order requiring MAC to participate in the arbitration based on the trial court’s finding
that MAC had assumed MPMA’s contractual responsibilities. The Appellate Division reversed the trial court’s order requiring
the Company to participate in the arbitration on the grounds that insufficient facts had been provided by Randolph Pain from which the
court could conclude the Company was required to participate in the arbitration. As a result, the Appellate Division remanded the issue
of whether Company is required to participate in the arbitration back to the trial court for further proceedings.
36
The
parties completed discovery in the remanded matter on November 29, 2019, and thereafter both the Company and RPRWC filed cross-motions
for summary judgment in their favor. On February 6, 2020, the Chancery Court denied RPRWC’s motion for summary judgment and granted
the Company’s cross-motion for summary judgment. The Chancery Court held that the Company cannot be compelled to participate in
the Arbitration. RPRWC has informed the Company that it does not intend to appeal the Chancery Court’s ruling and that it intends
to move forward solely against MAC. On March 25, 2020, the Chancery Court lifted the stay of arbitration relative to RPWC and MAC. In
its arbitration demand RPRWC alleges that MPMA, a subsidiary of MediGain, LLC, breached the terms of the billing services agreement the
parties had entered into and sought compensatory damages of $6.6 million and costs.
On
May 28, 2020, the arbitrator handling the matter conducted a scheduling conference with the parties in order to establish deadlines for
the parties to exchange discovery requests and responses. During the conference the arbitrator directed RPRWC to produce statement of
damages on which it bases its claim. RPRWC disclosed its statement of damages to MAC on June 12, 2020. RPRWC’s June 12, 2020 statement
of damages increased its alleged damages from $6.6 million and costs to $20 million and costs. On July 24, 2020, RPRWC disclosed a declaration
to MAC, in which RPRWC estimates its damages to be approximately $11 million plus costs. At this time, RPRWC has not provided any evidence
to support its increased claim for damages. RPRWC recently served expert reports in this matter. Plaintiff’s expert analyzed only
a minute portion of the claims alleged to have been mishandled and then extrapolated damages to be in the range of $9.8 million to $10.8
million; however, this is unrealistically based on an alleged 90-100% collection rate on charges. MAC is preparing rebuttal expert reports
to be submitted shortly. Currently, the arbitration hearing is scheduled for April 2022.
While
the allegations of breach of contract made by RPRWC are the subject of the ongoing legal proceedings, MAC believes RPRWC’s allegations
lack merit on numerous grounds. The Company and MAC plan to vigorously defend against RPRWC’s claim and in the event of a loss,
if any, they anticipate the loss to be substantially less than the amount claimed.
Please
see “Risk Factor - Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the
sellers.” in Part 1, Item 1A of this Annual Report on Form 10-K.
From
time to time, we may become involved in other legal proceedings arising in the ordinary course of our business. Including the proceedings
described above, we are not presently a party to any legal proceedings that, in the opinion of our management, would individually or
taken together have a material adverse effect on our business, consolidated results of operations, financial position or cash flows of
the Company.
Item
4. Mine Safety Disclosures
None.
PART
II
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