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Integrity Home Care partners oust president

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Former Integrity Home Care President Philip Melugin is no longer involved with the company he helped build in the last decade, and as a result of a suit he filed in December against his former partners, he now faces a lawsuit from Oxford HealthCare for breech of a noncompete clause.

On Feb. 14, Melugin reached a settlement agreement related to his December firing by Integrity partners Greg Horton and Paul Reinert, according to the attorneys involved.

Melugin filed suit Dec. 23 against Integra Healthcare Inc., also known as Integrity Home Care, and executives Horton and Reinert, the company’s other two shareholders. Melugin was fired from his president post Dec. 19, according to court filings. In the suit, Melugin claimed his firing was unlawful, and he alleged the partners attempted to force a buyback of his shares at an undervalued rate. According to court records, Melugin and Horton each owned 45 percent of the company, and Reinert held a 10 percent stake.

“A settlement has been negotiated as of (Feb. 14),” said Lathrop & Gage attorney Frank Evans III, who represented Integra Healthcare Inc. and defendants Horton and Reinert. “Our expectation is that the case will be dismissed in the near future. The company Integra will acquire all of Mr. Melugin’s interest.”

Terms of the out-of-court settlement were not disclosed.

Integrity Home Care, 2960 N. Eastgate Ave., provides home health and related services with 2,500 employees across seven offices in Missouri and Kansas.

Noncompete back in play
Before the settlement was reached, however, Springfield attorney Rick Temple filed a motion to intervene in the case on behalf of Cox Alternative Care of the Ozarks Inc., dba Oxford HealthCare.

According to the motion, statements Melugin made in his December petition of the court that he founded Integra and nurtured the company from its infancy were directly contrary to statements he made under oath in a case Oxford filed against Melugin in 2000 that claimed he violated a noncompete contract in forming Integra.

According to Temple, Melugin worked for Oxford between 1991 and September 1998, when he left the home-care provider as assistant vice president. He had signed a two-year noncompete clause that set a competitive boundary of 100 miles outside Springfield city limits.

Greene County Circuit Court Judge Calvin Holden denied Oxford’s motion Jan. 26, stating it should be an independent action unrelated to the existing case between the Integrity executives.

On Feb. 7, Oxford HealthCare filed a new case against Melugin claiming he committed perjury and fraud on the court and Oxford through his testimony in the prior case between them. Temple said the case in 2000 was settled out of court based on Melugin’s denials that he formed Integrity.

Melugin did not return calls for comment.

According to Missouri Secretary of State records, in November 1998, Melugin formed Integrity Healthcare LLC under the name ASA Investments Inc. Integra was organized with the help of MORES Partners LLP, which was formed in June 1998, and Horton is listed as an original partner in that company. Integrity Home Care in Springfield was originally organized as ASA Healthcare Inc. by Horton in January 2000 before it became Integra Healthcare Inc. in January 2003, and Melugin became a partner, according to state records.

In answers to allegations in the 2000 noncompete suit, Melugin acknowledges Horton helped form Integra Healthcare LLC, which was said to serve the Kansas City area, but Melugin denied having any part in the 2000 formation of Integrity Home Care in Springfield. Melugin described Horton as a friend from church and said they sought legal advice to ensure Melugin was not violating the terms of his noncompete agreement.

“Counsel advised us that we must erect a ‘Chinese wall’ between Integra and Integrity, which we did,” Melugin said in the 2000 case, which was included in the motion to intervene filed by Temple.

Oxford is asking the court to set aside its previous dismissal in the noncompete case based on Melugin’s statements in the shareholder case against Integra Healthcare Inc.

Integrity break-up
An attorney representing Melugin in his case against Integrity and its executives, said the Dec. 23 suit revolved around the ownership structure of the company.

“It was basically a business break-up of the three owners of Integra,” said Jim Tilden, attorney for Kansas City-based Seigfried Bingham Levy Selzer & Gee, who represented Melugin. “They had some differences as to how the company should be run and were unable to resolve them.”

According to court records, Horton and Reinert fired Melugin for one or more of the following reasons:
• dishonest or illegal conduct or the violation of a law involving moral turpitude;
• unfaithfulness or infidelity to his spouse; and
• acts with respect to the corporation which constitute fraud, gross negligence or breach of fiduciary duty.

Horton and Reinert did not return calls for comment.

A trial had been scheduled for March 28 to settle a dispute over the interpretation of the original shareholder’s agreement. Melugin’s suit claimed that he had the right to force a buyout of his partners’ shares or sell his own, known as a Russian roulette provision, according to Tilden. The defendants claimed they were within their rights to terminate Melugin and buy back his shares at a lesser value.

Court records show that Melugin had faced a board meeting in September where Horton and Reinert had planned Melugin’s termination, which would have led to the purchase of his shares under the shareholder’s agreement. However, the parties agreed to let Melugin take a six-month sabbatical. One month in, Melugin contacted his partners to let them know he wanted to leave the company, and, as acting president, he would invoke the buy-or-sell provision. Reinert and Horton then offered to move forward with the shareholder’s buyout plan under the terms of termination.

Tilden, who expects the case to be officially dismissed within days, said the suit itself was asking the court to determine which provision the business partners should follow.

Integrity Home Care recorded rapid growth in recent years, ranking first in Springfield Business Journal’s 2006 Dynamic Dozen awards on 2005 revenues of $20.5 million and a three-year revenue growth rate of 214 percent. The company posted 2008 revenues of $40 million, according to Springfield Business Journal archives.[[In-content Ad]]

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