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Home New Cases Medical Simulation Corporation Trustee Sues Ex CEO for Intentional Interference of Contract Relations, Recoupment, and Breach of Agreement

Medical Simulation Corporation Trustee Sues Ex CEO for Intentional Interference of Contract Relations, Recoupment, and Breach of Agreement

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May 24, 2021, District of Colorado – Debtor Medical Simulation Corporation created and deployed medical simulators that provided haptic and realistic feedback to accurately train clinicians on real-world medical procedures and accelerate the adoption of specific medical devices and procedures. Defendant William Younkes was the CEO of the Debtor. During their relationship, Defendant and the Debtor entered into several agreements, including an employment agreement, a nondisclosure agreement (“NDA”), an investor rights agreement ( “IRA”), etc. 

Allegedly, during Defendant’s tenure as President and CEO, the Debtor experienced significant financial losses, totaling approximately $10,000,000. Defendant and the Debtor’s management and board of directors apparently began to disagree about the direction and management of the Debtor resulting in the Debtor terminating Defendant’s employment agreement. Defendant and the Debtor entered into a separation agreement that governed the terms of Defendant’s termination.

The trustee brought a complaint against Defendant, alleging that Defendant breached his contractual obligations under the employment agreement, separation agreement, the IRA, and the NDA on numerous occasions, including :

  • directly competing with the Debtor’s division through one or more entities he set up for that purpose, 
  • making numerous contacts with the Debtor’s current or recently- terminated personnel to solicit them to compete with the Debtor, obtain Debtor’s confidential information, and/or interfering with their respective relationships with the Debtor,
  • asking the Debtor’s employees and/or former employees to disparage the Debtor and/or its management to third parties,
  • using the Debtor’s confidential information to pursue an unauthorized transaction with the Debtor’s largest customer, 
  • sharing the Debtor’s confidential information with third parties, including customers and competitors, without the Debtor’s knowledge or consent. 

Accordingly, the trustee brings a complaint, alleging breach of agreement and contractual obligations, intentional interference with contractual relations, recoupment/set off, and disallowance of claims. The trustee specifically urges the court to direct Defendant to return all payments made by the Debtor under the separation agreement. The trustee also objects to Defendant’s proof of claim, reasoning that Defendant’s claim is capped by Bankruptcy Code § 502(b)(7), which imposes a cap on claims resulting from the termination of employment contracts. Accordingly, the trustee argues that Defendant’s claim should be denied in its entirety. 

The case is In re Medical Simulation Corporation in the United States Bankruptcy Court for the District of Colorado under Case No. 19-20101-EEB 

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