United States District Court, S.D. Indiana, Indianapolis Division
PAIN CENTER OF SE INDIANA, LLC; INDIANA PAIN MEDICINE AND REHABILITATION CENTER, P.C.; and ANTHONY ALEXANDER, M.D., Plaintiffs,
ORIGIN HEALTHCARE SOLUTIONS LLC; SSIMED d/b/a SSIMED Holding, LLC; ORIGIN HOLDINGS, INC., a Delaware Corporation; JOHN DOES 1- 50 inclusive; and JOHN DOES 1-100 inclusive, Defendants.
ENTRY ON CROSS MOTIONS FOR SUMMARY JUDGMENT
RICHARD L. YOUNG, UNITED STATES DISTRICT JUDGE.
matter comes before the court on the parties' cross
motions for summary judgment. Plaintiffs, Pain Center of SE
Indiana, LLC (“Pain Center”), the Indiana Pain
Medicine and Rehabilitation Center, P.C.
(“PMRC”), and Anthony Alexander, M.D. (“Dr.
Alexander”), brought this action asserting twelve
claims against Defendants, SSIMED; Origin Healthcare
Solutions, LLC; and Origin Holdings, Inc. (collectively,
“SSIMED”). Plaintiffs' claims arise out of
two licensing contracts for practice management and
electronic medical records software from SSIMED. Plaintiffs
seek summary judgment on their breach of contract claim,
their theory of joint and several liability under the
corporate alter ego doctrine, and Defendants' affirmative
defenses of waiver, statute of limitations, laches, and
judicial estoppel. Origin moves for summary judgment on each
of Plaintiffs' claims. For reasons set forth below, the
court GRANTS summary judgment in favor of SSIMED and DENIES
Plaintiffs' motion for partial summary
summary judgment, the court should “pierce the
pleadings and . . . assess the proof in order to see whether
there is a genuine need for trial.” Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The moving party
must show “that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a). To survive the
motion, the nonmoving party must present specific facts
showing the existence of a genuine issue for trial.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250,
106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “A genuine issue
of material fact arises only if sufficient evidence favoring
the nonmoving party exists to permit a jury to return a
verdict for that party.” Springer v.
Durflinger, 518 F.3d 479, 483 (7th Cir. 2008) (internal
quotation marks omitted). At the summary judgment stage, the
evidence put before the court need not be admissible in form,
but it must be admissible in content. Wheatley v. Factory
Card & Party Outlet, 826 F.3d 412, 420 (7th Cir.
2016) (citing Winskunas v. Birnbaum, 23 F.3d 1264,
1267-68 (7th Cir. 1994)); see also Gunville v.
Walker, 583 F.3d 979, 985 (7th Cir. 2009)
(“Admissibility is the threshold question because a
court may consider only admissible evidence in assessing a
motion for summary judgment.”).
provides full-service billing to health care providers using
its proprietary software, Practice Manager. (Filing Nos.
324-1, 338-15, 328-5, and 333-1 (“McMahon Dep.”)
at 26:18-24, 29:1-11). Full-service clients leave the billing and
revenue collection aspects of their practices to SSIMED to
manage. (Id.). SSIMED also licenses Practice Manager
to “systems clients” who opt to manage their own
billing and collection operations. (Id. at 29:1-11;
Filing No. 324-3 (“Defs.' Suppl. Answers to
Pls.' Interrog.”) at 7-8). In addition to Practice
Manager, SSIMED also licenses its medical records management
software, known as EMRge, to practices that use electronic
medical records. (Filing Nos. 324-4, 338-5, 327-5, 333-4, and
346-1 (“Pls.' 30(b)(6) Dep.”) at 82:3-6).
2005, a group of investors acquired SSIMED and other
companies that provided technology products and services to
medical providers. (Filing Nos. 324-5, 338-13, 328-3, and
333-5 (“Kvam Dep.”) at 21:8-17). The investors
formed Origin Healthcare Solutions, LLC to provide financial,
marketing, and management support for the acquired companies.
(Id. at 26:2-27:19, 31:2-20). Origin Holdings, Inc.
indirectly owns Origin Healthcare Solutions LLC.
(See Filing No. 25).
Alexander founded Pain Center in 2001 to provide clinical
services to patients suffering from chronic pain. (Pls.'
30(b)(6) Dep. at 22:18-21). Pain Center reorganized itself as
PMRC in 2008. (Id. at 30:8-11). PMRC assumed
all contracts executed by Pain Center, including the
licensing agreements at issue in this matter. (Id.
at 31:23- 32:5).
SSIMED licenses Practice Manager and EMRge to Pain
2003, Joy Deckard, a representative of SSIMED, contacted Pain
Center's billing specialist and office manager, Rhonda
Mellencamp, about converting to Practice Manager as its
billing software. (Filing Nos. 324-7, 338-17, 328-7, and
333-7 (“Mellencamp Dep.”) at 70:9-25; Pls.'
30(b)(6) Dep. at 128:6-8). Pain Center and SSIMED executed a
licensing agreement for Practice Manager on June 18, 2003.
(Pls.' 30(b)(6) Dep. at 129:23-130:10). On June 28, 2006,
the parties executed a separate licensing agreement for
EMRge. (Id. at 143:21-144:13). Deckard represented
SSIMED during the sale of each software package.
(Id. at 144:1-7).
systems client of SSIMED, Pain Center used Practice Manager
to generate its own claims for payment. (Filing No. 324-10,
338-18, 328-8, and 333-10 (“Harmon Dep.”) at
144:19-145:11). The staff at Pain Center, including
Mellencamp, received a week of on-site training on the
software from SSIMED trainer, Amy Kiernan. (Filing Nos.
324-9, 338-9, 327-9, and 333-9 (“Kiernan Dep.”)
at 87:1-7). Kiernan trained the staff Monday through Thursday
and then “shadowed” them on Friday as they used a
demo version of Practice Manager. (Id. at 87:1-7,
76:17-24). Kiernan also briefly shadowed Dr. Alexander on
Practice Manager, but testified that he did not attend the
majority of the training. (Id. at 88:2-10). Kiernan
testified that she showed Dr. Alexander how to use the
software to schedule appointments, run billing reports, and
how to obtain product support from SSIMED. (Id. at
90:1-11). Kiernan returned to Pain Center's office in
2006 to train its staff on the EMRge software. (Id.
at 95:20-22, 129:12-15; Pls.' 30(b)(6) Dep. at 85:15-17).
Pain Center experiences problems with Practice Manager and
systems clients must use Practice Manager to generate their
own claims, SSIMED directs the claims to insurers and
provides pertinent information regarding the status of
claims. (Filing Nos. 328-1 and 338-11 (“Burke
Dep.”) at 104:5-24; Filing Nos. 327-7 and 338-7
(“Defs.' 30(b)(6) Dep.”) at 229:16-22,
232:18-25). The claim submission process begins with the
client's transmission of daily “closing
files” to SSIMED. (Defs.' 30(b)(6) Dep. 229:16-22).
SSIMED then takes successfully transmitted closing files and
generates claims files to send to insurers through its
clearinghouse. (Burke Dep. at 105:10-16). Insurers may take
two to three days to process the claims. (Id. at
104:18-24, 105:17-19). Once processed, claims reports appear
in a tool in Practice Manager known as the “Client
Center.” (Id. at 105:3-19). The claims reports
inform the client whether claims successfully transmitted to
insurers and, if so, whether an insurer paid a particular
claim. (McMahon Dep. 115:6-23, 213:5- 13).
processing may fail at any stage of the submission process.
(Burke Dep. at 94:21-95:15). Certain data-entry errors, such
as incorrect diagnosis codes or patient birthdates, may
prevent successful transmission of daily closing files to
SSIMED, requiring the client to correct the errors. (McMahon
Dep. at 115:8-23; Filing No. 324-11, 338-16, 328-6, and
333-11 (“Pierce Dep.”) at 44:8-14, 50:18-25,
52:10-17; Harmon Dep. at 38:22-39:12). Some claims might
transmit to the insurer but nonetheless “error
out.” (Burke Dep. at 95:12-15). When a claim fails, a
report is generated in the Client Center that informs the
client of the claim's status and any submission errors
requiring corrections. (Id. at 104:18-105:16;
McMahon Dep. at 115:15-19). Corrupt files in SSIMED's
internal software might also prevent a claim file from
generating properly. (Burke Dep. at 10:16-11:3, 16:13-24).
Unlike submission errors, glitches from corrupt files require
SSIMED-not the client-to troubleshoot the problem.
(Id. at 11:4-10). Claims with submission errors
(i.e., errors on the client's end) remain in the Client
Center and unpaid unless they are corrected and resubmitted.
(Id. at 16:2-12; Harmon Dep. 38:22-39:5,
Center (and later, PMRC) used Practice Manager from 2003 to
2012 and, according to Plaintiffs, experienced problems with
the software from the beginning. (Pls.' 30(b)(6) Dep. at
82:11-23). Specifically, Dr. Alexander testified that his
entities experienced transmission problems between Pain
Center and SSIMED, missing claims, and errors in patient data
and billing amounts. (Id.). Revenue shortfalls from
unpaid claims regularly compelled Plaintiffs to call SSIMED
to inquire about the status of claims. (Id. at
196:11-24). Dr. Alexander testified that SSIMED repeatedly
blamed unpaid claims on the failure or refusal of insurers to
pay. (Id. at 222:2-6). He further testified that his
staff routinely followed up with insurers who, “on
numerous occasions, too numerous to even talk about, ”
reported that they had not received claims. (Id. at
former billing specialist, Demetria Hilton Pierce, joined
PMRC in October 2011 and immediately noticed that insurers
were not paying all submitted claims. (Pierce Dep. at
242:2-14). When Pierce inquired about the disparity between
collections and claims billed, SSIMED directed her to the
Client Center where she discovered approximately three
thousand unattended claims containing submission errors.
(Id. at 44:3-14, 44:24-45:4, 49:3-11). SSIMED
informed Pierce that no one from PMRC had logged into the
Client Center in approximately eighteen months. (Id.
at 45:16-21). This backlog of uncorrected claims rendered
many of them stale, and, despite Plaintiffs' subsequent
efforts, insurers ultimately denied payment. (Id. at
licensed EMRge in 2006 and experienced problems with the
software “almost from the beginning, ” in 2006 or
2007. (Pls.' 30(b)(6) Dep. at 81:3-9). A medical records
software, EMRge provides a means of inputting and storing
patient information electronically. (Id. at
79:5-80:7). According to Plaintiffs, EMRge frequently dropped
certain data inputted during a particular visit, requiring
Plaintiffs' staff to reenter the lost information.
(Id.). Consequently, Dr. Alexander instructed his
nurses to maintain paper charts and printed screen images
from EMRge as a precautionary backup in case of lost data.
(Id.). Plaintiffs do not, however, present evidence
that EMRge contributed to the purported losses associated
with claim errors or missing claims for payment.
Plaintiffs' financial problems and investigative
2010, PMRC filed a voluntary petition for Chapter 11
bankruptcy. (Id. at 38:18-39:6). In a disclosure
statement filed on March 3, 2011, PMRC represented that its
financial troubles stemmed from its “managers and other
staff members . . . mismanaging the business, ” and
that Dr. Alexander “was not aware of this mismanagement
until April of 2010.” (Id. at 64:1-15).
2003 and 2012, Dr. Alexander made many attempts to discover
the source of revenue problems. He made personnel changes in
the billing department, hired an economist to investigate the
problem, routinely contacted SSIMED to inquire about unpaid
claims, and, subsequently, followed up with insurers about
those claims. (Id. at 102:10-23, 221:10-222:12,
335:23-336:4; Filing No. 338-4 (“Dr. Alexander
Decl.”) ¶ 32). In 2005, Plaintiffs contemplated
pursing legal action against certain insurers for failing to
honor claims. According to Plaintiffs' counsel, Patrick
Harrison, discussions with Plaintiffs continued through 2011,
but “sporadic payments” from insurance companies
“stymied” their investigation. (Filing No. 338-22
(“Harrison Decl.”) ¶ 2; Pls.' 30(b)(6)
Dep. at 196:11-21).
to Plaintiffs, two events in early 2012 caused them to
suspect SSIMED as the culprit for their financial distress.
(Pls.' 30(b)(6) Dep. at 335:23-337:2). First, Demetria
Pierce discovered an abrupt and significant change in
PMRC's claims submission history. (Pierce Dep. at
144:10-145:14). Every morning, Pierce provided Dr. Alexander
a report generated through Practice Manager that showed
PMRC's outstanding claims-that is, claims with errors
that required corrections. (Id. at 145:18- 146:19).
One morning in March 2012, Pierce noticed that outstanding
claims dropped from approximately $21 million to
approximately $15 million. (Id. at 144:24-145:3).
Pierce inquired with SSIMED, which explained that PMRC had
either adjusted its accounts receivable (i.e., write off
balances as losses) or received payment. (Id. at
146:20-147:7). Pierce testified that PMRC had not received
payment and she had not made adjustments to the accounts
receivable. (Id. at 147:18-148:8).
second event giving rise to Plaintiffs' suspicion
involved PMRC's “meaningful use” credit.
(Pls.' 30(b)(6) Dep. at 205:14-206:12). The government
provides financial credit to health care providers who use
electronic medical records and billing systems in ways that
improve the quality of health care. (Id. at
206:13-20). The program credits providers when they counsel
patients on the health hazards of smoking. (Id. at
206:16-23, 208:3-7). Unsatisfied with the credit PMRC had
received, Dr. Alexander sought assistance from SSIMED.
(Id. at 205:14-22). According to Dr. Alexander, the
software's patient questionnaire from which the
meaningful use data derives contained a grammatical
“double negative, ” making it difficult for
patients to accurately report whether they received
counseling for smoking cessation. (Id. at
206:16-208:11). Dr. Alexander testified that PMRC had
received credit for only five percent of patients,
“when [it] should have been getting credit for every
patient that came through the door.” (Id. at
208:14-25). In response to Dr. Alexander's complaint,
SSIMED changed the structure of the sentence, boosting
PMRC's credit received from five percent to ninety-nine
percent of patients. (Id. at 207:21-208:2). This
interaction, Plaintiffs maintain, alerted them to
SSIMED's deceptive practices and the extent to which its
software failed to function as advertised. (Id. at
commenced this action on January 25, 2013, asserting twelve
claims against SSIMED. (Filing No. 16 (“Amended
Complaint”)). On December 1, 2014, the court dismissed
four claims, and Dr. Alexander abandons his claim for
intentional infliction of emotional distress. This leaves the
following claims for decision on summary judgment: fraud,
fraud in the inducement, breach of contract, breach of
warranty, fraudulent misrepresentation, and tortious
interference with business relations.Plaintiffs root their breach
of contract and breach of warranty claims in SSIMED's
failure to deliver Practice Manager and EMRge as represented
to Plaintiffs. (Amended Complaint ¶ 101). They also
claim that SSIMED failed to provide the support, unlimited
claim submission, or software upgrades as required in the
contracts. (Id. ¶ 100). Plaintiffs base their
fraud claims on the misrepresentations Deckard made about the
functional capabilities of the software and the quality of
associated support services SSIMED would provide. Finally,
Plaintiffs claim that SSIMED's conduct interfered with
their ability to pursue various lucrative business
opportunities. Before reaching the merits of the parties'
motions, the court must resolve certain evidentiary issues.
Dr. Alexander's declaration
objects to certain portions of Dr. Alexander's
declaration as inconsistent with his deposition testimony and
therefore inadmissible. A declaration used to oppose summary
judgment must be made on personal knowledge and set forth
facts that would be admissible in evidence. Fed.R.Civ.P.
56(c)(4). When a party submits its own declaration to
supplement prior deposition testimony, the court disregards
any portion of the declaration that conflicts with the prior
testimony. Preddie v. Bartholomew Consol. Sch.
Corp., 799 F.3d 806, 809 n.1 (7th Cir. 2015);
Russell v. Acme-Evans Co., 51 F.3d 64, 67-68 (7th
Cir. 1995) (“We have been highly critical of efforts to
patch up a party's deposition with his own subsequent
affidavit.”). To avoid exclusion of a conflicting
statement, the party advocating its admission must
demonstrate that “the statement in the deposition was
mistaken . . . .” Russell, 51 F.3d at 68.
first challenges certain statements in Dr. Alexander's
declaration concerning the representations Deckard made to
Dr. Alexander in 2003 and again in 2006 about the
capabilities of Practice Manager and EMRge, respectively. Dr.
Alexander submitted to a Rule 30(b)(6) deposition as the sole
corporate representative for Pain Center and PMRC. When asked
by his counsel to describe the representations Deckard made
with respect to SSIMED's product testing, Dr. Alexander
Well, a lot of that had to do with the fact they had
thousands of customers, and that those customers had already
verified the software. Other things that they said that were
extremely misleading was that they have been involved in pain
management, and that their software package was ready to go
for a pain practice. Other things that they said that I found