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Pain Center of Se Indiana, LLC v. Origin Healthcare Solutions LLC

United States District Court, S.D. Indiana, Indianapolis Division

December 1, 2014



RICHARD L. YOUNG, Chief District Judge.

Plaintiffs, Pain Center of SE Indiana, LLC, The Pain Medicine and Rehabilitation Center, P.C., and Anthony Alexander, M.D. (collectively referred to as "Plaintiffs"), operated a privately-owned outpatient medical clinic in Seymour, Indiana. This case arises out of certain medical practice software Plaintiffs purchased from Defendants, Origin Healthcare Solutions LLC; SSIMED (d/b/a SSIMED Holding, LLC); and Origin Holdings, Inc. (collectively, "Origin"). Plaintiffs allege Origin personnel fraudulently induced Plaintiffs to purchase the software, and fraudulently misrepresented the quality, character, and other pertinent facts regarding its support services and software. Defendants now move to dismiss Counts I, II, V, VII, VIII, IX, XI, XII, and XIII of Plaintiffs' First Amended Complaint under Rule 12(c) of the Federal Rules of Civil Procedure. For the reasons set forth below, the motion is GRANTED in part, and DENIED in part.

I. Background

According to the First Amended Complaint ("Amended Complaint"), SSIMED was established in 1991 as an electronic health record vendor and provider of physician software and services. (Am. Compl. ¶ 14.) The software was directed at medical claim coding, patient appointment tracking, and medical insurance billing. ( Id. ) Plaintiffs allege that, due to a SSIMED sales representative's misrepresentations, Plaintiffs entered into a contract to purchase the "SSIMED Practice Manager Suite: including Practice Manager and Scheduler" in June 2003. ( Id. at ¶¶ 30-35.) Plaintiffs allege they were falsely assured that SSIMED had installed dozens of these systems without error, installing this new program was less expensive than maintaining their current software, the software and services would prevent any problems with claim reimbursements, the software would be adequately maintained, the users would be trained, and the representatives and relevant support staff had been extensively trained. ( Id. ) At some later point, Origin Healthcare Solutions assumed the contracts as successors-in-interest to SSIMED. ( Id. at ¶ 17.)

Shortly after entering into the agreement, the software began exhibiting errors, which Plaintiffs claim they were unaware of at the time. ( Id. at ¶ 38.) However, Plaintiffs began noticing they had not received anticipated revenues from third party payors, including Medicaid, Medicare, and various insurance companies, despite having presented claims through the new software. ( Id. at ¶ 39.) Origin's staff indicated that the problems were due to the insurance companies' decisions to decline the submitted bills. ( Id. at ¶ 40.) Plaintiffs allege the claims were never actually presented to the insurance companies, which was hard for them to discover because of the difficulty of separating single claim errors from the submissions of millions of bundled claims that were transferred at once in batch files. ( Id. ) Plaintiffs claim these problems were exacerbated by Origin's inadequate training of users and employees. ( Id. at ¶ 43.)

Around November 2006, an Origin sales representative told Plaintiffs its product "EMRge" would allow for expedient billing reimbursement and patient record management that would upgrade Plaintiffs' current system. ( Id. at ¶ 46.) Plaintiffs allege Origin stated "EMRge" was specifically designed to work with "Practice Manager" and would eliminate past inconveniences that occurred because it was using different clinical data software. ( Id. ) Origin further stated this package did not have "glitches" that would result in bills not being properly submitted to the insurance companies. ( Id. at ¶ 47.) Origin assured Plaintiffs that even if such problems were to occur, the software had the capacity to prevent and/or rectify such problems and the adequately trained support staff would prevent losses from occurring. ( Id. )

In addition, Plaintiffs allege they learned through an Origin employee that Origin had possession of Plaintiffs' submission histories, and failed to inform Plaintiffs of the fact that over a 10-year period, Plaintiffs' report generated only $21.9 million despite clinical visit numbers which justified well in excess of $30-36 million. ( Id. at ¶ 60.) As a result of the severe shortfall in claims reimbursements, Plaintiffs were forced to borrow from banks and friends to cover financial obligations. ( Id. at ¶ 70.)

Plaintiffs' 48-page Amended Complaint against Origin consists of thirteen Counts, including counts for fraud (Count I), fraud in the inducement (Count II), unjust enrichment (Count V), fraudulent misrepresentation (Count VII), negligent misrepresentation (Count VIII), intentional infliction of emotional distress (Count IX), tortious interference with a business relationship (Count XI), negligence (Count XII), and a Lanham Act claim (Count XIII).

All other allegations necessary to the court's decision will be addressed in the Discussion Section.

II. Dismissal Standard

A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is evaluated under the same standard of review as a 12(b)(6) motion. Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007). To survive a motion to dismiss, "the complaint need only contain a short and plain statement of the claim showing that the pleader is entitled to relief.'" EEOC v. Concentra Health Servs., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Rule 8(a)(2)). In ruling on a motion to dismiss, the court construes the allegations of the complaint in the light most favorable to the plaintiff, and all well-pleaded, nonconclusory, factual allegations in the complaint are accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A motion to dismiss should be granted if the plaintiff fails to proffer "enough facts to state a claim that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007). A claim has facial plausibility "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 663.

Asking for plausible grounds does not impose a probability requirement at the pleading stage; instead, it requires the plaintiff to plead enough facts to raise a reasonable expectation that discovery will reveal evidence of the allegation. Twombly, 550 U.S. at 545. The need at the pleading stage for plausible allegations reflects Rule 8(a)(2)'s threshold requirement that the "plain statement" possess enough heft to "sho[w] that the pleader is entitled to relief." Id.

III. Discussion

As noted previously, Defendants move to dismiss eight state law tort claims asserted in Counts I, II, V, VII, VIII, IX, XI, and XII, and one federal claim asserted in Count XIII. Indiana law governs Plaintiffs' state law claims. The court will begin its discussion with Plaintiffs' fraud claim.

A. Count I, Fraud

1. Actual Fraud

To establish actual fraud under Indiana law, a plaintiff must show there is: (1) a material misrepresentation of past or existing fact (2) made with knowledge of or reckless disregard for the falsity of the statement, and (3) the misrepresentation is relied upon to the detriment of the relying party. Schott v. Huntington Nat. Bank, No. 1:12-cv-430, 2012 WL 6725902, at *7 (S.D. Ind. Dec. 27, 2012) (citing Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 675 (Ind. 1997)). When a plaintiff alleges fraud, she must "state with particularity the circumstances constituting fraud... Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b). The Rule requires a plaintiff to allege a "general outline" of the alleged fraud that would "reasonably notify the defendants of their purported role in the scheme." Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1020 (7th Cir. 1992).

A plaintiff asserting fraud must perform a "pre-complaint investigation to assure that the claim is responsible and supported, rather than defamatory and extortionate." Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007). Consequently, the complaint must demonstrate the "who, what, when, where, and how" of the fraud. Id. Specifically, the complaint must state "the identity of the person who made the representation, the time, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 563 F.3d 663, 668 (7th Cir. 2008). The requirements will be somewhat tempered, however, when a plaintiff "does not have access to all the facts necessary to provide details, such as when those facts are within the exclusive knowledge of the defendant." Hirata Corp. v. J.B. Oxford and Co., 193 F.R.D. 589, 592 (S.D. Ind. 2000).

Here, Plaintiffs assert the following allegations to support their claim of fraud: (1) Origin representatives intentionally and materially made misleading representations regarding the characteristics and services associated with Origin software prior to signing contracts in 2003 and 2006; (2) Origin knew the representations were false when it made them, or it made them with reckless disregard for their truth or falsity; and (3) Plaintiffs relied on Origin's representations to their detriment, suffering substantial pecuniary loss including economic and non-economic damages and additional damages. (Am. Compl. ¶¶ 73-79.) Origin argues that this is not enough, as Plaintiffs failed to satisfy the "who, when, where, and how" required by Rule 9(b) to maintain a cause of action for fraud. The court disagrees.

Plaintiffs generally identify the "who" as Origin representatives. Identification of the individual employee is not necessary at this time because "institutional identifications meet the Rule 9(b) standard." MDG Int'l, Inc. v. Australian Gold, Inc., No. 1:07-cv-1096, 2008 WL 3982072, at *3 (S.D. Ind. Aug. 22, 2008) (citing Blaz v. Michael Reese Hosp. Found., 191 F.R.D. 570, 574 (N.D. Ill. 1999) (finding the institutional identity of the caller is what matters, not the individual employee, so plaintiff sufficiently pled the "who" requirement of Rule 9(b))). Further, "Exhibit A" identifies Joy King/Long as the sales representative. See Fed.R.Civ.P. 20(c) (written instrument that is an exhibit to the pleading is part of pleading for all purposes). Thus, the "who" requirement is satisfied.

Plaintiffs also allege when Origin's misrepresentations were made, i.e., during the periods of June 2003 and November 2006 (Am. Compl. ¶¶ 29-35; 46-51). Therefore, the Defendants have been provided sufficient notice as to when the misrepresentations occurred. Hefferman v. Bass, 467 F.3d 596, 601 (7th Cir. 2006) (allegations that misrepresentation occurred "sometime in late August or early September 2003" satisfied Rule9(b)); Comentis, Inc. v. Purdue Research Found., 765 F.Supp.2d 1092, 1110 (N.D. Ind. 2011) ("in or about February 2009" provided sufficient detail under Rule 9(b)); Greer v. Advanced Equities, Inc., 683 F.Supp.2d 761, 772 (N.D. Ill. 2010) ("the fall of 1999' or November 1999' is specific enough under Rule 9(b)"). Again, the exhibits provide further specificity as to the dates of those representations. As such, the Plaintiffs also met the "when" requirement.

Lastly, Plaintiffs allege the "how" and "where" the alleged misrepresentations were made. Specifically, the "how" was Origin making affirmative misrepresentations, and the "where" was the business presentation at Plaintiffs' principal place of business. (Am. Compl. ¶¶ 30-31; 464-7.); Methodist Hosps., Inc. v. FTI Cambio, No. 2:11-cv-36 *2 (N.D. Ind. Dec. 5, 2011) (finding the plaintiff alleging a "sales presentation in July 2007" was sufficient for the "where" requirement of fraud, and "making affirmative representations" was sufficient for the "how" for the purposes of ...

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