San Antonio Express-News (Sunday)
BAREFOOT CEO
Thursday. A CaptureRx spokeswoman said in an email the company had no comment.
CaptureRx acts as an administrator for hospitals, clinics and health centers participating in the 340B program, a government initiative requiring pharmaceutical companies to sell drugs at a discount to health care providers caring for underserved populations.
Hotchkiss takes credit for spearheading CaptureRx’s expansion to more than 180 employees and annual revenue topping $45 million. (In a court document in another case, Hotchkiss puts the figures at more than 100 employees and more than $18 million in annual revenue.)
Jesus and the Dalai Lama
A San Antonio Express-News profile of Hotchkiss a year ago portrayed him as a boss who dislikes shoes but treads a path of eccentric excellence. He peppered his conversations with references to Jesus and the Dalai Lama, both of whom he claims as role models. His left forearm bears a tattoo of the musical notes from “Heaven,” a tune by 1980s pop star Bryan Adams that Hotchkiss and his wife adore.
Hotchkiss shared that he had planned to resign in 2018 to spend more time with family and for other personal reasons but chose to stay with CaptureRx.
“I won’t abandon vowed, referencing and clients.
Yet, about two months later, Hotchkiss abruptly quit as CEO. In a lawsuit last month against NEC Networks LLC, which does business as CaptureRx, he expressed growing frustration with certain executives and board members for his decision to leave in late July. He cited their acts “to undermine and impede” his ability to perform his duties.
The Express-News later reported that Hotchkiss’ departure came amid accusations that he had made threats against board members and the family of an employee. A worker called police to the company’s office on East Houston Street. Management posted an armed guard at the entrance.
Hotchkiss denied he made any threats, though he admitted to punching through walls twice and screaming at employees.
“I can get emotional when my employees make significant mistakes,” he said.
In another lawsuit filed in October, Hotchkiss alleged Jose Padilla, who was CaptureRx’s general counsel and Hotchkiss’ successor as co-CEO, “falsely and maliciously them,” he employees accused Hotchkiss of threatening physical harm to Padilla’s family.”
The suit adds, “CaptureRx employees were frightened by Padilla’s conduct and Padilla’s characterizations of Hotchkiss’s alleged threats of violence.”
Hotchkiss alleges in both lawsuits that CaptureRx and Padilla defamed him by “publishing false statements” about him. That has caused him“financial injury,” and damage to his reputation in the pharmaceutical industry and San Antonio business community, the suits say.
Hotchkiss seeks more than $1 million in damages from each.
Padilla disputed the allegations and asked the court to award Hotchkiss nothing. Padilla’s tenure as co-CEO was short-lived — he departed in September. Hotchkiss alleges CaptureRx terminated Padilla following an employee’s anonymous complaint about the lawyer’s “aggressive and threatening behavior.”
Marc Tolliver, a Dallas attorney representing Padilla, said the allegations are without merit.
“This suit … against Mr. Padilla is just another example of Mr. Hotchkiss’ attempt to intimidate anyone he happens to disagree with,” Tolliver said.
A $3 million loan
CaptureRx, meanwhile, has leveled its own charges against Hotchkiss. He’s accused in an April 23 countersuit of defaulting on a nearly $3 million loan. He skipped 15 biweekly payments of $37,500 and a $550,000 payment that was due in March, and owes $12,000 in overdue interest, it says. The note’s balance exceeds $1 million, according to a court filing.
In addition, CaptureRx called Hotchkiss’ complaint a “Strategic Lawsuit Against Public Participation,” also known as a SLAPP suit. It’s intended to “censor, intimidate and silence” the company and employees “who lawfully made police reports complaining of and responding to (Hotchkiss’) erratic, unprofessional, disturbed and threatening behavior … by attempting to burden them with the cost of a legal defense until they abandon their criticism, opposition or complaints.”
Two minority shareholders — Billy Tauzin and Talmage J. Whitehead — joined the fray this month by filing their own lawsuit objecting to what they say is a “self-serving coup” hatched by Hotchkiss and his relatives. The suit was brought on behalf of themselves and the company.
Tauzin is a one-time chief lobbyist for the drug industry and former Louisiana congressman who famously helped doom President Bill Clinton’s health care reform.
Whitehead is the CFO of an Arkansas health care provider.
Tauzin was a Hotchkiss backer when interviewed last year. He likened Hotckiss to a “resurrected hippie.”
“I’ve never met a CEO like him,” Tauzin said. “He’s a strange mix, but he’s delightful.”
According to the pair’s lawsuit, CaptureRx’s board is composed of three managers: Hotchkiss’ father, Lyle, and brother Richard, and Whitehead.
Richard Hotchkiss and Whitehead oppose Christopher Hotchkiss’ return, the suit says.
A plan to ‘stack’ the board
To overcome the opposition votes, the suit alleges, Christopher Hotchkiss and his father have been attempting to appoint Lyle’s brother Lee and his son John Hotchkiss — Christopher’s uncle and cousin — to the board.
The plan is to “stack” the board in their favor to have the votes to reinstate Christopher Hotchkiss as CEO or board manager.
The suit alleges Lyle doesn’t have the authority to take such action.
“The Hotchkisses are attempting to change the composition of the Board, so Chris Hotchkiss can control a puppet Board, in order to dismiss the Counter-claim against him, forgive his substantial debt to the company, and ratify a new employment agreement, which, upon information and belief, provides grossly excessive compensation and benefits,” Tauzin and Whitehead’s suit alleges.
Even though Hotchkiss quit as CEO, he continued to serve as a company manager. Tauzin and Whitehead accuse Hotchkiss of charging more than $100,000 to a company credit card during a 10day trip to Hawaii that had “no credible business purpose related to the Company.” They say he owes the company close to $2 million.
A vote to remove
Six days after Hotchkiss sued CaptureRx on April 7, shareholders voted to remove him as a company manager.
Lyle Hotchkiss supported the termination, acknowledging that his son’s involvement in the management “was against the best interests of the Company,” Tauzin and Whitehead’s complaint says.
At a May 7 board meeting, the suit continues, Lyle Hotchkiss introduced his brother Lee and nephew John as new company managers. It’s not clear what led to Lyle Hotchkiss’ apparent change of heart, if the lawsuit is to be believed.
Lyle Hotchkiss had no authority to appoint the pair, the suit adds. At the meeting, a majority of the board — presumably Whitehead and Richard Hotchkiss — adopted a resolution that objected to attempts to appoint new managers.
Neither Lee nor John Hotchkiss have any experience in CaptureRx’s industry and neither is an investor in the company, the suit says.
Tauzin and Whitehead have sued to stop Christopher Hotckiss’ reinstatement. They also allege he and his father have breached their duties to the company.
Tauzin and Whitehead obtained a temporary restraining order to prevent Hotchkiss’ return and the appointment of any new managers.
On Tuesday, state District Judge Antonia Arteaga extended the temporary restraining order, or TRO, until a Monday hearing on an injunction application. The ruling put on ice a meeting of shareholders that had been set for Thursday to consider the addition of Lee and John Hotchkiss to the board.
Tauzin and Whitehead are represented by the same Dallas law firm that filed CaptureRx’s countersuit against Christopher Hotchkiss. Derick Rodgers, Hotchkiss’ lawyer, called the dual representation a conflict of interest. He wants the firm disqualified.
Rodgers also questioned the law firm’s authority to represent CaptureRx. He told the judge during Tuesday’s hearing that he had been informed by Sawnie McEntire, an attorney with the firm, that it had been terminated by CaptureRx’s president. McEntire added, however, that his firm had been engaged by CaptureRx’s general counsel, according to Rodgers.
“It is my understanding if (McEntire) is not authorized to act on behalf of the company, then any act that he takes, including that of seeking a TRO, would be invalidated and would be undone,” Rodgers said.
McEntire’s firm is opposing Rodgers’ various motions, including the motion to disqualify and one challenging its authority to represent CaptureRx.
Rodgers didn’t respond to a request for comment. McEntire declined to comment.