Datatrak, the US-based eClinical specialist currently in dire financial straits and weighing up its future, has filed a lawsuit claiming damages and other repayments over what Datatrak says are breaches of contract relating to its acquisition of ClickFind, Inc in February 2006.

Datatrak paid US$18 million for ClickFind, a privately held company based in Bryan, Texas that provided integrated technology solutions for clinical trials. Jim Bob Ward, president and chief executive officer of ClickFind, joined Datatrak as vice-president of eClinical development.

At the time, Datatrak said taking on board ClickFind’s integrated software architecture, and combining it with Datatrak’s core electronic data capture (EDC) resources to form the Datatrak eClinical product suite, immediately fulfilled the company’s strategy of “being able to provide its customers with the broadest multi-component eClinical capability in the clinical trials market”.

But the last couple of years have failed to deliver on that promise. Instead, Datatrak has been forced by mounting losses to cut its costs and launch a strategic review to consider the options for maximising shareholder value, including a possible sale or merger.

The company has already been negotiating with ClickFind noteholders in a failed attempt to restructure the repayment terms for a US$3.0 million balloon payment due on 1 February 2009 under the terms of the acquisition agreement. Last December, Datatrak reported that it was unlikely to be able to meet this obligation unless it could renegotiate the ClickFind notes or raise additional capital.

Numerous breaches

Now Datatrak has filed a lawsuit in the US District Court for the Northern District of Ohio, Eastern Division against Ward and seven other former ClickFind shareholders, alleging “numerous breaches of the warranties and representations” made by ClickFind in its merger agreement with Datatrak.

A 12 September filing with the Securities and Exchange Commission noted that Ward had been removed from his position as executive vice-president as of that date and that his employment agreement with Datatrak had been terminated “for cause”.

Datatrak is seeking compensatory and punitive damages of US$5 million from the former ClickFind shareholders, as well as a “reformation” of the February 2006 merger agreement, “such that the US$18 million purchase price is adjusted to reflect what Datatrak would have paid for ClickFind had ClickFind disclosed the subject material information”.

The charge is that ClickFind and certain of its former shareholders “willfully and fraudulently failed to disclose material information in connection with Datatrak’s acquisition of ClickFind, in breach of several of the representations and warranties made by ClickFind in the February 2006 merger agreement”.

The outcome of the dispute will not affect Datatrak’s rights to the technology purchased with ClickFind or its ability to deliver any of its products and services, Datatrak added.