Digital health startup Fruit Street Health has initiated legal proceedings against Sharecare, a well-known digital health company, alleging breach of contract and fiduciary duty. The lawsuit, filed in Georgia, centers around claims that Sharecare developed and launched a competing diabetes prevention program, leveraging insights gained from their partnership with Fruit Street.
Fruit Street Health, a New York-based company specializing in delivering the CDC’s Diabetes Prevention Program (DPP) through telehealth, claims Sharecare violated their business agreement. They argue that Atlanta-based Sharecare, by launching its own DPP, directly competed with Fruit Street after previously offering Fruit Street’s program to its members. Sharecare has refuted these claims, asserting the lawsuit is without merit.
The legal action seeks over $25 million in compensatory and punitive damages and was officially lodged in the Superior Court of Fulton County, Georgia.
Fruit Street Health: Pioneering Digital DPP Delivery
Founded in 2014, Fruit Street Health operates as a public benefit corporation. Their innovative digital platform facilitates the delivery of the CDC’s rigorously tested diabetes prevention program. This platform uniquely combines health coaching, activity tracking, and interactive group classes, all delivered virtually by registered dietitians. This approach expands access to crucial preventative healthcare, particularly for individuals at risk of developing type 2 diabetes.
Sharecare: Digital Health Giant Faces Legal Challenge
Sharecare, established in 2010 by WebMD founder Jeff Arnold and Dr. Mehmet Oz, has grown into a significant player in the digital health space. The company provides a comprehensive health and wellness engagement platform targeted at employers and health plans. Their services encompass a wide range of telehealth programs, addressing conditions such as diabetes, mental health, and cardiovascular disease. Sharecare became a publicly traded company in 2021 through a Special Purpose Acquisition Company (SPAC) merger.
The collaboration between Fruit Street and Sharecare began in 2018, with Sharecare integrating Fruit Street’s DPP into its platform. This partnership aimed to enhance Sharecare’s offerings in diabetes management and prevention.
Allegations of Misconduct and Breach of Duty
According to the lawsuit, the core of the dispute lies in Sharecare’s launch of its own DPP in January. Fruit Street alleges that Sharecare leveraged confidential information and insights gained during their partnership to develop this competing program, named “Eat Right Now.” Fruit Street contends this action constitutes a breach of fiduciary duties and a violation of their agreement.
Sharecare’s 2021 SEC filing described its digital therapeutics marketplace as a collection of “value-added proprietary and partner-powered solutions.” The filing explicitly mentioned the diabetes prevention program offered through their “partnership with Fruit Street Health.” Fruit Street argues that Sharecare’s subsequent launch of a competing program directly undermines this partnership and unfairly leverages Fruit Street’s expertise and market presence in the digital DPP space.
Fruit Street CEO Laurence Girard expressed his strong disapproval, stating he was “completely shocked and outraged” by Sharecare’s actions. He emphasized the need for accountability for larger public companies when dealing with smaller, innovative digital health startups like Fruit Street Health.
Sharecare’s Counter-Argument and Vendor Relationship Concerns
Sharecare, however, presents a different perspective on the situation. Jen Martin Hall, Sharecare’s EVP of Corporate Communications, stated that Sharecare made substantial efforts to support Fruit Street and integrate their program into the Sharecare ecosystem.
Sharecare claims that Fruit Street failed to meet expected standards of “financial stability and integrity,” making the continuation of their vendor relationship untenable. Furthermore, Sharecare alleges that Fruit Street and Mr. Girard have a history of litigation as a business tactic and that Fruit Street owes Sharecare over $3 million. Sharecare is confident that the legal process will reveal the “true nature” of their vendor relationship with Fruit Street.
The lawsuit highlights the increasing complexities and potential conflicts within the rapidly evolving digital health market, particularly concerning partnerships between established companies and innovative startups like Fruit Street Health, focused on specialized programs like digital diabetes prevention. The outcome of this legal battle could set important precedents for collaborations and intellectual property rights in the digital health sector.
