On June 29, 2018, the Chancery Court of Davidson County, Tennessee, denied a request from SDC Financial LLC and SmileDirectClub LLC for a temporary injunction to prevent Align Technology Inc from opening additional Invisalign stores under its pilot program that aims to connect consumers interested in Invisalign treatment with Invisalign trained doctors.
SDC Financial and SmileDirectClub allege that the launch and operation of Align’s Invisalign store pilot program constitutes a breach of non-compete provisions applicable to the members of SDC Financial, including Align. In April, SDC Financial and SmileDirectClub initiated proceedings that seek, among other forms of relief, to preliminarily and permanently enjoin all activities related to the Invisalign store pilot project, require Align to close the existing Invisalign stores, prohibit Align from opening any additional stores, and allow SDC Financial and SmileDirectClub to exercise a right to repurchase all of Align’s SDC Financial membership interests for a purchase price equal to Align’s current capital account balance.
Following the Chancery Court’s denial, Align stated that it will continue to open additional Invisalign stores as part of its pilot program.
SmileDirectClub released a statement responding to the ruling: ”SmileDirectClub is pleased with the State Court’s finding that Align Technology is providing services substantially similar to SmileDirectClub’s SmileShop model, in violation of the Operating Agreement. However, SmileDirectClub respectfully disagrees with the Court’s reluctance to enter a temporary injunction to prevent Align Technology from opening additional scan shops. We remain confident that the final result of arbitration will be in our favor.”
In a press release, Align said it continues to dispute the allegations that it has breached its obligations to SDC Financial and SmileDirectClub under applicable law and will “oppose and vigorously defend itself” at arbitration proceedings scheduled for December 2018.